Friday, 5 August 2016

Gold Rises to 4-Week Highs, U.S. Data in Focus

Gold prices rose to four-week highs on Friday, as the Bank of England’s decision to lower interest rates continued to support and as investors eyed the release of key U.S. employment data due later in the day. On the Comex division of the New York Mercantile Exchange, gold futures for December delivery were up 0.23% at $1,370.55. The December contract ended Thursday’s session 0.20% higher at $1,367.40 an ounce. Futures were likely to find support at $1,347.00, Thursday’s low and resistance at $1,374.90, the high from July 6. 
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Gold prices moved higher after the Bank of England delivered its first rate cut in seven years on Thursday and announced more measures to stimulate the economy in a bid to ward off recession following Britain's vote in June to leave the European Union. The BoE cut interest rates to a record-low 0.25% in a bid to buffer the economy from a downturn following the Brexit vote. The central bank also boosted its quantitative easing program by £60 billion and slashed its growth forecast for next year. It now expects growth of just 0.8% in 2017, down from 2.3% in its May forecasts.  

Almost all economists had expected the BoE to cut rates and many also expected it to resume its multi-billion-pound program of government bond purchases. The precious metal was also supported by a weaker dollar following Thursday’s mixed U.S. data. Sentiment on the greenback remained vulnerable after the U.S. Census Bureau said that factory orders decreased by 1.5% in June, better than forecasts for a decline of 1.8%.  

The report came after the Labor Department said initial jobless claims increased by 3,000 to 269,000 from the previous week’s total of 266,000. Analysts expected jobless claims to decline by 1,000 to 265,000 last week. Market participants were now looking ahead to the highly-anticipated U.S. nonfarm payrolls report, due later Friday, for further indications on the strength of the job market. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.13% at 95.63.  

Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies. Elsewhere in metals trading, silver futures for September delivery were little changed at $20.447 a troy ounce, while copper futures for September delivery edged up 0.09% to $2.176 a pound.

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