Gold Rises After China Rate Cut

Gold rose, heading for the highest close in three weeks, as China cut benchmark interest rates to support economic growth.

China’s one-year deposit rate was lowered by 0.25 percentage point to 2.75 percent, while the one-year lending rate was reduced by 0.4 percentage point to 5.6 percent, effective tomorrow, the People’s Bank of China said on its website today.

“An accommodative policy is generally friendly to gold,” Joni Teves, a precious metals analyst at UBS AG in London, said by phone. “China’s gross domestic product in recent years has coincided with growth in demand for gold.”

Gold for December delivery climbed 1 percent to $1,202.90 an ounce on the Comex by 8:30 a.m. in New York. The metal is up 1.4 percent this week. Bullion for immediate delivery was up 0.8 percent at $1,203.50 an ounce, according to Bloomberg generic pricing.

Looser monetary policy will stoke expectations for faster inflation, making gold more attractive to investors, Teves said. The reduction puts China on the side of the European Central Bank and Bank of Japan in deploying fresh stimulus and contrasts with the Federal Reserve, which has stopped its quantitative easing program.

Futures trading volume on the Comex was 89 percent above the 100-day average for this time of day, data compiled by Bloomberg show.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza