Gold futures headed for the biggest gain in two weeks after European Central Bank President Mario Draghi unveiled an unprecedented round of measures to combat deflation, boosting demand for alternative assets.
The ECB today cut its deposit rate to minus 0.1 percent, becoming the first major central bank to take one of its main rates negative. Draghi said the ECB will introduce new, “targeted” offerings of liquidity to banks to encourage them to lend. Bullion rose more than 40 percent since the end of 2008 as policy makers printed money at a record pace to boost expansion.
“The market is reacting to Draghi and his measures to end deflation,” Alfonso Esparza, a senior currency analyst in Toronto at Oanda Corp., said in a telephone interview.
Gold futures for August delivery climbed 0.5 percent to $1,251 an ounce at 9:20 a.m. on the Comex in New York, heading for the biggest advance since May 22. Through yesterday, prices climbed 3.5 percent in 2014.
The metal slumped 28 percent last year on speculation the Federal Reserve would ease stimulus as the economy strengthens. A government report due tomorrow may show the U.S. added 215,000 jobs last month. Bullion slumped 3.9 percent in May, the biggest drop this year, as U.S. equities headed for record highs.
“The market will also be closely watching what happens tomorrow with the job numbers,” Esparza said.
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