Carney’s Stimulus Package Sends Gold Prices Near Three-Week High

Updated on
  • U.K. central bank cuts key interest rate, pares growth outlook
  • Gold may climb close to $1,400 an ounce, Rosland Capital says

BOE's Carney Cuts Rate for 1st Time in Seven Years

Central bankers just keep giving gold investors good news. This time, it’s Mark Carney’s turn.

The Bank of England Governor unleashed a package of stimulus, including the central bank’s first interest-rate cut in seven years, sending gold prices close to a three-week high. The stimulus, meant to contain the fallout from the U.K.’s vote to exit European Union, came as the BOE cut the nation’s growth forecast.

Bullion has rallied 29 percent this year as the U.S. Federal Reserve held back on tightening and other central banks pledged to do more to boost growth following the U.K.’s vote. As easy money prevails, traders will turn their attention on Friday to the non-farm payrolls data from the U.S. government for clues on the timing for the next Fed rate increase. Low rates are a boon to precious metals because they don’t offer yields or dividends.

Gold futures for December delivery rose 0.2 percent to settle at $1,367.40 an ounce at 1:54 p.m. on the Comex in New York, after touching $1,371.40. On Aug. 2, prices rallied to $1,374.20, the highest since July 11.

For an explainer on gold’s recent price performance, click here.

“The BOE decision was important in so far as it triggered buying of gold, particularly by institutional investors and large speculators,” Jeffrey Nichols, a New York-based senior economic adviser at Rosland Capital LLC, said in a telephone interview. “Now investors are looking for gold to go still higher, possibly breaking out above the recent trading range, and moving up to close to $1,400 an ounce, instead of $1,350 an ounce.”

On Wednesday, investors boosted their holdings in gold-backed exchange traded funds by 2 metric tons to 2,025.7 tons, extending their rise to the highest since July 2013, data compiled by Bloomberg show.

In other metals and mining news:

  • Randgold Resources Ltd. is fighting to meet its full-year production target after operational problems at two of its African mines led to lower gold output and profit. The shares dropped in London.
  • Silver futures fell on the Comex in New York, while platinum and palladium futures declined on the New York Mercantile Exchange.