Gold Rallies as Base Metals Slip Amid Dimmed ECB Growth Outlook

  • European policy makers boost quantitative-easing plan
  • ECB expects `economic recovery to continue at a modest pace'

Investors Moving Back to Gold Amid Global Economic Risks

Gold futures posted the first gain in four days as the dollar fell and the European Central Bank flagged risks to the outlook for economic growth. Copper and other industrial metals slid on prospects for slower demand in the region.

ECB President Mario Draghi, speaking Thursday after policy makers cut the benchmark rate to zero, said most recent survey data point to weaker-than-expected growth momentum at the beginning of the year. The dollar fell against a basket of 10 currencies after Draghi said he sees no need for further interest-rate cuts, boosting the appeal of gold as a store of value.

Bullion is up 20 percent this year as demand for haven assets surges with gyrations in financial markets and mounting concerns about global economic growth. Draghi said at a press conference Thursday that the recovery in the euro area continues to face hurdles including subdued demand in emerging markets and volatile financial markets. Copper was on pace for its first weekly decline since Feb. 12 as the deteriorating demand outlook overshadowed the benefits of a weaker dollar.

“You had the dollar go up and then down, and gold followed the dollar’s lead,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “Gold has an inverse relationship to the dollar, typically, especially in the short term.”

Gold futures for April delivery added 1.2 percent to settle at $1,272.80 an ounce at 1:42 p.m. on the Comex in New York. The metal lost 1 percent over the prior three days.

Investors resumed building holdings in exchange-traded funds backed by gold, with holdings rising 4.1 metric tons on Wednesday after falling 1.1 tons the day before. The total stood at 1,728.1 tons, the highest since August 2014, according to data compiled by Bloomberg.

“Draghi came out during the press conference and said he doesn’t anticipate more rate cuts, because you can’t take it so low that it will hurt banks,” Tai Wong, the director of commodity products trading at BMO Capital Markets in New York, said in a telephone interview. “The dollar effect overshadowed the interest-rate effect for the last $10 rally in gold.”

Copper futures for May delivery fell 0.6 percent to close at $2.22 a pound on the Comex. The metal, up 4 percent this year, is down 2.4 percent this week.

  • The Bloomberg Americas Mining Index of 29 producers headed for a second straight gain, led by Vancouver-based First Quantum Minerals Ltd.
  • On the London Metal Exchange, aluminum, copper, lead, nickel, tin and zinc declined.
  • Silver futures for May delivery climbed 1.2 percent to $15.549 an ounce on the Comex. Palladium advanced on the New York Mercantile Exchange, while platinum closed lower.
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