Friday, July 06, 2012 4:06:46 AM

What is the gold price today? Gold prices retreated on Thursday as investors’ concerns over flagging global economy failed to subside despite major central banks slashing interest rates. Gold investors were expecting some more hard measures being taken by central banks after a much stagnated first two quarters of 2012.


Earlier on Thursday, the People’s Bank of China slashed interest rates for the second time in less than a month as the world’s growth engine lost momentum in the second quarter amid euro zone debt crisis.

The European Central Bank (ECB) slashed the benchmark interest rates to record low levels at 0.75% and its deposit rate to zero percent, in a move aimed at providing some stimulus to ailing economy of the monetary union which is simmering under high unemployment level, struggling banking sector, and unsustainably high amount of government debts and falling industrial production.

The euro weighed by debt crisis came under more pressure when ECB President Mario Draghi said on Thursday during the ECB meeting that euro zone economy still remains highly vulnerable. The euro and gold prices generally move in tandem.

Later, the Bank of England alarmed by deteriorating economy of the UK, kept the interest rate unchanged and also provided second round of quantitative easing, amounting to 50 billion pounds which is about $78 billion.

Whenever central banks employ low interest rates regime, it spurs inflation, making gold more attractive to own, since it bears no yield or dividend that can be eroded by an environment of loose monetary policy.

Spot gold edged down 0.68 percent to $1,604.20 per ounce, falling from a session high of $1,623.80 touched after China announced a surprise rate cut.

U.S. gold futures fell by $12.40 to close at $1,609.40 an ounce.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 1.13% lower at $155.68.

Commenting over rate cuts, Walter de Wit, analyst at Standard Chartered Bank said that although loose monetary policy augurs well for gold prices, its impact (monetary policy) will be only seen in the long run.

“Overall, rate cuts by China, the ECB, and the U.S. are all positive for gold, on a slightly longer view than just one day for the simple reason that with inflation where it is, you start cutting interest rates of course then real interest rates get lower. So we see it as a bullish development for gold, and most of the other precious metals should be benefit from that,” added Wit while speaking to Reuters.

Now the entire spotlight will be on the U.S. non-farms payroll report for June, expected to be released on Friday June 6. This data will be a perfect gauge to find out whether the fed will provide any economic stimulating measures such as QE3.

If the data for June shows weakness in the job market just like the preceding one for May then it’s very likely that fed might take some action.

On the other hand, if the U.S job market shows improvement, fed is unlikely to adopt any dovish steps.

“If the job numbers coming out tomorrow are better than expected, then you eliminate or start to change the psychology of any imminent Fed action,” cautioned Frank McGhee, head precious metals traders at IBS Metals, as he spoke to Reuters.

In some other precious metal markets, Silver slid by 1.64 percent to $27.65 an ounce. Spot Platinum inched lower 0.25 percent to $1,469.00, while palladium fell down by 1.34 percent to $584.00 an ounce.

Lately, auto-catalysts metals such as platinum and palladium have been under tremendous pressure as their demand from automobile industry fell down significantly amid declining consumer spending in the euro zone. Besides, the prices have also been volatile due to supply chain problems as one of the world’s biggest platinum miner, Impala Platinum grappled with falling production due to inter-union skirmishes.

Gold Prices Settle Higher; Silver Prices also Gain

Gold prices settled sharply higher on Thursday as broadly weaker U.S. dollar boosted the demand for dollar-priced commodities in international markets. Silver prices also edged higher in trading on Th...» read full story