Investing.com - Gold futures held on to strong gains during U.S. morning hours on Wednesday, trading at a four-week high after the European Central Bank kept rates unchanged and pledged to extend some of its liquidity providing operations.
Gold also climbed on the possibility the Federal Reserve will consider more action to stimulate growth in the world’s largest economy.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,636.45 a troy ounce during early U.S. morning trade, rallying 1.2%.
It earlier rose by as much as 1.4% to trade at USD1,642.15 a troy ounce, the highest since May 7.
Gold futures were likely to find support at USD1,546.35 a troy ounce, the low from June 1 and near-term resistance at USD1,647.85, the high from May 4.
Market participants noted that gold’s gains accelerated after breaking above key resistance close to USD1,630, triggering fresh buy orders amid bullish chart signals.
Investors hung on to hopes for action by global central banks and other authorities to stimulate growth and boost the world economy, boosting the appeal of the precious metal.
Gold prices have rallied on past monetary stimulus measures. Investors tend to pile in to the yellow metal on fears that excess liquidity would put a damper on the value of paper currencies and spark inflation. The precious metal is widely considered a hedge against inflation and a store of value.
ECB President Mario Draghi said earlier that the economic outlook in the euro zone faces downside risks, adding that indicators for the second quarter point to weakening growth across the region.
Draghi also said that main refinancing operations will continue to be conducted for as long as necessary, extending the operations until the end of the January 15, 2013.
The comments came after the central bank left interest rates unchanged at 1%, in a widely expected move. “We still have very low nominal rates and negative real rates," he said about the bank's decision to hold the key interest rate.
Gold traders were now shifting their attention to a Congressional testimony by Federal Reserve Chairman Ben Bernanke on Thursday about the state of the U.S. economy.
Gold traders will be looking for clues as to the likelihood of a fresh round of monetary easing, which could potentially hurt the U.S. dollar and support gold.
The Wall Street Journal, citing interviews and Fed speeches, reported late Tuesday that the U.S. central bank is mulling new measures to stimulate growth in the world’s largest economy.
Charles Evans, president of the Chicago Federal Reserve Bank called earlier for aggressive policy easing in the U.S., citing the recent run of "soft" economic data.
Atlanta Fed President Dennis Lockhart echoed that sentiment, saying that he remains “confident that the FOMC retains the capacity to act and the tools to promote stability."
QE has been a key driver in gold’s bull run, as it keeps interest rates and borrowing costs low, which makes gold more attractive compared with yield- or dividend-bearing assets such as bonds or stocks.
Gold gained as much as 15% earlier this year to hit USD1,790 an ounce after the Fed said in January it would keep interest rates near zero until at least late 2014 and indicated that it could introduce a fresh round of asset-purchases.
However, prices have lost almost 9% since late February, amid growing concerns the European debt crisis has been escalating, which has fueled demand for the yellow metal's hedge, the greenback.
Elsewhere on the Comex, silver for July delivery surged 3.5% to trade at USD29.40 a troy ounce, the highest since May 8, while copper for July delivery climbed 1.7% to trade at USD3.344 a pound.
Gold also climbed on the possibility the Federal Reserve will consider more action to stimulate growth in the world’s largest economy.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,636.45 a troy ounce during early U.S. morning trade, rallying 1.2%.
It earlier rose by as much as 1.4% to trade at USD1,642.15 a troy ounce, the highest since May 7.
Gold futures were likely to find support at USD1,546.35 a troy ounce, the low from June 1 and near-term resistance at USD1,647.85, the high from May 4.
Market participants noted that gold’s gains accelerated after breaking above key resistance close to USD1,630, triggering fresh buy orders amid bullish chart signals.
Investors hung on to hopes for action by global central banks and other authorities to stimulate growth and boost the world economy, boosting the appeal of the precious metal.
Gold prices have rallied on past monetary stimulus measures. Investors tend to pile in to the yellow metal on fears that excess liquidity would put a damper on the value of paper currencies and spark inflation. The precious metal is widely considered a hedge against inflation and a store of value.
ECB President Mario Draghi said earlier that the economic outlook in the euro zone faces downside risks, adding that indicators for the second quarter point to weakening growth across the region.
Draghi also said that main refinancing operations will continue to be conducted for as long as necessary, extending the operations until the end of the January 15, 2013.
The comments came after the central bank left interest rates unchanged at 1%, in a widely expected move. “We still have very low nominal rates and negative real rates," he said about the bank's decision to hold the key interest rate.
Gold traders were now shifting their attention to a Congressional testimony by Federal Reserve Chairman Ben Bernanke on Thursday about the state of the U.S. economy.
Gold traders will be looking for clues as to the likelihood of a fresh round of monetary easing, which could potentially hurt the U.S. dollar and support gold.
The Wall Street Journal, citing interviews and Fed speeches, reported late Tuesday that the U.S. central bank is mulling new measures to stimulate growth in the world’s largest economy.
Charles Evans, president of the Chicago Federal Reserve Bank called earlier for aggressive policy easing in the U.S., citing the recent run of "soft" economic data.
Atlanta Fed President Dennis Lockhart echoed that sentiment, saying that he remains “confident that the FOMC retains the capacity to act and the tools to promote stability."
QE has been a key driver in gold’s bull run, as it keeps interest rates and borrowing costs low, which makes gold more attractive compared with yield- or dividend-bearing assets such as bonds or stocks.
Gold gained as much as 15% earlier this year to hit USD1,790 an ounce after the Fed said in January it would keep interest rates near zero until at least late 2014 and indicated that it could introduce a fresh round of asset-purchases.
However, prices have lost almost 9% since late February, amid growing concerns the European debt crisis has been escalating, which has fueled demand for the yellow metal's hedge, the greenback.
Elsewhere on the Comex, silver for July delivery surged 3.5% to trade at USD29.40 a troy ounce, the highest since May 8, while copper for July delivery climbed 1.7% to trade at USD3.344 a pound.