Prices of gold surged to 14 month highs during early trading hours on Friday, as a lower United States dollar and uncertainty due to the Bank of Japan’s decision to keep its monetary policy unchanged strengthened the yellow metal.
On the COMEX division of the New York Mercantile Exchange, gold futures for June delivery climbed 0.76 percent to $1,276.10. The June contract closed Thursday’s session jumping 1.28 percent to $1,266.40 per pounce.
Futures were strengthened at $1,238.50, which is Thursday’s lowest level, and resistance at $1,303.50.
Safe haven demand was boosted after the Bank of Japan on Thursday held its monetary policy, defying market forecasts for more monetary easing.
The Bank of Japan opted to keep the deposit rate at negative 0.1 percent (-0.1%), and its asset purchases at 80 trillion yen per year. Japan’s central bank also pushed back the anticipated data for hitting its 2 percent inflation target.
BOJ’s decision came a day after the Federal Reserve kept interest rates the same, which is near to zero, on Wednesday and gave little guidance on future rate hikes.
According to a commodity analyst, “The main reason for the rally is that the markets expected the BOJ to announce more easing measures and the dollar is continuing to weaken. There are quite a lot of people on the long side. So I think the momentum will continue for both metals.”
Market player shifted their focus on the United States data on employment costs, personal spending, and consumer sentiment which will be reported on Friday, for more signs on the strength of the economy after data on Thursday shows a mixed statues, dampening demand for the dollar.
The Bureau of Economic Analysis stated on Thursday that United States economic growth tumbled to an annual rate of 0.5 percent, from the 1.4 percent expansion registered in the fourth quarter of 2015, which was the slowest pace of growth since the first quarter of 2014.
Meanwhile, the United States Department of Labor noted that the number of individuals filing for initial jobless claims in the week ended April 23 diminished by 9,000 to 257,000. Market analysts had forecasted jobless benefits to rally by 12,000 to 260,000 last week.
The United States dollar index that gauges the dollar’s strength against its trade weighted rival major currencies plunged 0.34 percent at 93.41, which is its lowest level since August 2015.