May 2 (Bloomberg) -- Gold futures rose the most in a week after the European Central Bank cut borrowing costs to a record, boosting the appeal of the precious metal as a store of value.
The benchmark interest rate was cut by a quarter percentage point to 0.5 percent with the 17-nation euro region in a recession. ECB President Mario Draghi said that monetary policy “will remain accommodative for as long as needed.” Yesterday, the Federal Reserve pledged to keep buying bonds at a pace of $85 billion a month to boost the U.S. economy.
“The ECB lowering its rate is supporting gold, and it seems as if the central banks are in a competitive devaluation quest,” Frank Trotter, the president of EverBank Direct in Jacksonville, Florida, said in a telephone interview. “Both the ECB and the Fed are leaving their options open.”
Gold futures for June delivery advanced 1.5 percent to settle at $1,467.60 an ounce at 1:38 p.m. on the Comex in New York, the biggest gain for a most-active contract since April 25. Prices have rebounded 11 percent since touching a two-year low of $1,321.50 on April 16.
The metal climbed for 12 years through 2012 as central banks around the world ramped up stimulus to spur growth. Gold tumbled into a bear market last month as some investors lost faith in the metal as a traditional store of value amid an equity rally.
Yesterday, assets in exchange-traded funds backed by gold dropped 0.2 percent to 2,272.28 metric tons, the lowest since October 2011, according to data compiled by Bloomberg. They have dropped 14 percent from a record on Dec. 20.
Silver futures for July delivery gained 2.1 percent to $23.83 an ounce on the Comex.
On the New York Mercantile Exchange, platinum futures for July delivery gained 2.1 percent to $1,500.20 an ounce.
Palladium futures for June delivery rose 1.2 percent to $693.30 an ounce.
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