Gold jumps 1% as Fed signals patience on rate hikes, BoE holds fire

Gold prices jumped 1% on Thursday after the Federal Reserve indicated it would be patient on raising interest rates and as the Bank of England defied expectations of more hawkish policy

Spot gold was up 1.7% to $1,793 per ounce, after touching a three-week low on Wednesday. U.S. gold futures for December delivery jumped 1.3% to $1,787.00 per ounce

“Gold is trying to recover some of yesterday’s losses and the market is taking some comfort from the fact that there was no strong signal with regards to future rate hikes from the Fed,” Saxo Bank analyst Ole Hansen said

The U.S. central said on Wednesday it would start trimming its massive bond-buying programme beginning this month, and stuck with its contention that high inflation would be transitory

Following that, the Bank of England kept interest rates on hold on Thursday, dashing expectations for a hike that would have made it the first of the world’s big central banks to raise rates after the pandemic

“There was some nervousness ahead of ahead of the Bank of England announcement … but since there was no change (in rates) that may have added additional bids to the market,” Hansen said

Ultra-loose U.S. monetary policy has helped drive gold sharply higher since the financial crisis of the late 2000s, with low interest rates cutting the opportunity cost of holding non-yielding assets and inflation fears stoking demand for a hedge

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of gold, which pays no interest

Independent analyst Ross Norman said strong physical demand for gold was supporting market, as India’s Diwali festival generally boosts sales of the precious metal