Gold turns higher after Bank of England cuts rates

Gold turns higher after Bank of England cuts rates

Gold turns higher after Bank of England cuts rates

old prices turned higher on Thursday after the Bank of England cut interest rates for the first time since 2009, though gains were muted by strength in the dollar after the previous day’s upbeat U.S. jobs data.

In addition to the cut in rates to a record low 0.25 percent, the BOE said it would buy 60 billion pounds of government debt to ease the blow from Britain’s June 23 vote to leave the European Union.

Gold is highly sensitive to falling interest rates, which cut the opportunity cost of holding non-yielding bullion.

“The revision in expectations for monetary policy in the U.S., Japan, the euro zone and the UK has played a big role in the rise in the gold price so far this year, and we expect it to continue,” Capital Economics analyst Simona Gambarini said. “Monetary policy in the UK, euro zone and Japan is likely to remain extremely accommodative… that should be good for the price of gold, despite the fact that they are less of an important factor than the Federal Reserve decision. They all add up to a general low or negative rate environment.”

Further policy loosening in the UK helped push European shares up 0.6 percent, while the dollar rose 0.3 percent against a currency basket, drawing strength from a stronger-than-expected ADP jobs number on Wednesday.

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