Gold Climbs After China Cuts Rates, Draghi Hints at Stimulus – Bloomberg

Gold climbed by the most in more than a week after the European Central Bank signaled it may boost monetary stimulus and China announced interest rate cuts.

Futures advanced as much as 1.1 percent after China cut its benchmark lending rate and reserve requirements for banks, stepping up efforts to bolster the economy. On Thursday, markets took ECB President Mario Draghi’s comments that policy makers wanted to be “vigilant” as a signal that additional easing was coming as soon as December. That weakened the euro against the dollar and has helped send bullion priced in the European currency to the highest in three months.

Gold has risen 5.6 percent this month as patchy economic data spurred traders to push back expectations for a U.S. rate increase to next year. While Goldman Sachs Group Inc. put the probability of a move in December at about 60 percent, Fed-fund futures show odds of 36 percent for an increase this year. Higher borrowing costs curb the appeal of gold because it doesn’t give returns like bonds or equities.

“News of a rate cut in China is helping support investor sentiment and precious metals,” Georgette Boele, an Amsterdam-based strategist at ABN Amro Bank NV, said by e-mail. “Gold central bank easing makes gold as a low yielding asset more attractive.”

Gold Prices

Bullion for December delivery rose 1.1 percent to $1,178.90 an ounce by 7:57 a.m. on the Comex in New York. It’s down 0.4 percent this week. Spot metal priced in euros touched the highest since July 7, data compiled by Bloomberg show.

Gold reached a five-year low in July on expectations that the Fed will soon raise rates for the first time since 2006. Policy makers will meet Oct. 27-28.

Holdings in exchange-traded products backed by gold fell 0.2 metric tons on Thursday, cutting this week’s increase to 7.8 tons, according to data compiled by Bloomberg. While assets reached the highest since July on Wednesday, they’re less than 3 percent above a six-year low reached in August.

Silver for December delivery added 1.2 percent to $16.03 an ounce in New York. Platinum was up 0.4 percent and palladium gained 2.2 percent.