The gold price made gains during early morning London trading, as a surprise rate cut from the Reserve Bank of Australia bolstered the metal’s value as an alternative currency.
Spot gold was last seen at $1,281.80/1,282.60, up $7.90 for the day after so far trading within an intraday range of $14.
“Gold prices are consolidating near rebound highs, but there does seem to be some scale-up selling capping the upside. The recent pullbacks across the complex though could just be bull-flags – on balance we remain friendly towards bullion,” FastMarkets analyst William Adams said.
The move follows news that the Reserve Bank of Australia cut rates to a record low of 2.25 percent, citing weak economic growth and higher unemployment than was previously anticipated.
The news represents the bank’s first cut to interest rates since August 2013 and has been designed to stimulate business activity in the face of slowing growth and low commodity prices.
“This morning, gold is benefitting from the RBA’s rate cut, a step that will accelerate the global depreciation race of currencies,” Commerzbank said in a note.
“Other central banks will probably follow suit and also cut their interest rates. As a result, gold will be more attractive as a store of value and alternative currency,” it added.
Gold denominated in the Australian dollar surged to its highest since October 2012 as a result at 1,683.60.
“On the whole, negative news for economies seems to be the theme and this should keep gold supported. It looks as though we may test the upper end of the new range towards $1,300, but unless we can conclusively hold above there for a few days, I would look to sell above,” Marex Spectron’s David Govett said.
Gradual increases in oil prices are also propping up sentiment in commodities, on continued speculation that output cuts may be on the horizon.
The rumours come following the release of US data that showed demand for leasing oil rigs is slowing, which investors believe suggests that producers might be preparing to cut output.
Last Friday, data showed that 94 US and 11 Canadian oil rigs were wound down over the past week.
Brent Crude oil is up to $56.55 per barrel, a one month high, after hitting a 2009 low last month at $45. WTI is also climbing and was last seen at $51 a barrel, up from lows of $43.
In today’s data, Spanish unemployment was better than expected at 78,000. However, the Italian preliminary CPI for January fell 0.4 percent and the December PPI dropped 1.0 percent, both worse-than-forecast. Still to come, US factory orders and US vehicle sales – which will be widely eyed for movements in the PGMs, particularly palladium.
In other metals, silver is up 47 cents at $17.64/17.69 per ounce, after hitting a high at $17.75 earlier in the session.
The PGMs are also both performing strongly, platinum is up $11 at $1,236/1,241 per ounce while palladium is up $10 at $791/797 per ounce.
(Editing by Martin Hayes)
The post Gold gains on improving oil prices and surprise RBA rate cut appeared first on The Bullion Desk.
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