By Barbara Kollmeyer and Sarah Turner, MarketWatch
MADRID (MarketWatch) — Gold futures turned higher Tuesday after the Bank of Japan said it will up its asset purchases to help beat deflation, and as the euro rose against the dollar.
Gold for August delivery GCQ2 +0.41% rose $3.70 to $1,592.80 an ounce on the Comex division of the New York Mercantile Exchange. Gold was down over $2 earlier.
The metal rose after Bank of Japan Governor Masaaki Shirakawa said the bank was implementing “strong monetary easing steps, such as its near-zero interest rate policy and asset purchases in order to overcome deflation,” in comments while attending a government meeting.
Shirakawa said the central bank has accumulated up to ¥54 trillion ($681 billion) of asset purchases so far, but is aiming for ¥70 trillion. And through the accumulation of another ¥16 trillion in assets, “we believe the impact of monetary easing will be further enhanced,” he was quoted as saying.
“Banks are now starting to pick up gold, given the amount of monetary stimulus pumped in across various economies across world,” said Michael Hewson, senior market analyst at CMC Markets. “They’re trying to mitigate currency exposure and currency depreciation.
“If you take the view the Fed is going to print more money, it would make sense for central banks to hold more gold,” said Hewson. “It’s the only thing you can’t manipulate print or devalue.”
Gold gains were linked to a rise for the euro versus the dollar EURUSD -0.2874% .
“The U.S. economy continues to slow down,” said Hewson. “Obviously the job figures we saw last Friday justify further stimulus at this time.”
The ICE dollar index DXY +0.06% reached 83.155, up from 83.165 in late North American trading on Monday.
“A defensive mood dominated overnight amid weaker Chinese import growth and a lackluster Eurogroup statement,” said RBC Capital Markets strategists.
China released data Tuesday that showed import and export growth both slowed in June, while the Eurogroup put out a statement giving more details on plans to support Spain’s banking sector and allowing Spain more time to reduce its budget deficit.
Gold investors are likely waiting for the U.S. Federal Reserve’s interest-rate setting committee on Wednesday to release the minutes of its latest meeting, said HSBC gold analysts.
“With little in the way of U.S. economic releases ahead of the Fed minutes, bullion prices may be subject to even modest changes in investor sentiment regarding the tone and direction of the Fed minutes,” they said.
“We believe a shift towards further monetary easing has the potential to send prices back over $1,600 an ounce,” the analysts said.
Barbara Kollmeyer is an editor for MarketWatch in Madrid.
Sarah Turner is MarketWatch's bureau chief in Sydney.
