LONDON — Gold eased on Friday as investors cashed in some of the previous day’s 2% gains, though expectations that rock-bottom interest rates will persist served to keep prices above $1,225 an ounce.
Spot gold was $1,229.60 an ounce at 1440 GMT, down 0.2%, while US gold futures for April delivery gained 0.3% to $1,230.30.
Prices remain up nearly 16% so far this year, with turmoil in the wider financial markets fuelling interest in the metal as a store of value while reducing the likelihood of further interest rate rises by the US Federal Reserve.
That is continuing to underpin gold as it consolidates below last week’s one-year high of $1,260.60.
“Momentum is strong. Yesterday gold moved up even when the dollar was stronger, so for me that signals that it is mainly central bank-policy driven,” ABN Amro analyst Georgette Boele said.
Gold tends to benefit from lower interest rates, which cut the opportunity cost of holding non-yielding assets.
The metal has been supported by inflows into gold-backed exchange-traded funds (ETFs), holdings of which have already risen this year by more than they fell in the whole of 2015.
Holdings of the world’s top gold ETF, SPDR Gold Shares, rose a further 0.38% to 713.63 tonnes on Thursday.
“Gold moved up pretty sharply and a period of reflection and sideways trading would seem appropriate,” said Simon Weeks, head of precious metals at the Bank of Nova Scotia.
“As a safe haven, it is definitely coming into play again.
We’ve had negative interest rate announcements around the world, so perhaps people felt they’d got a little ahead of themselves in terms of their optimism about the economic recovery.” A halt in this week’s oil price rally held back European stocks and pushed German Bund yields lower on Friday as worries about the global economic outlook lingered.
In the physical markets, Asian gold demand slowed this week as consumers opted to wait out the metal’s biggest price rally in years, with discounts in key consumer India hitting a record high as some investors cashed out holdings.
Silver was down 0.2% at $15.38 an ounce, while platinum was flat at $943 and palladium rose 0.4 percent to $503.87.
The value of gold compared with silver reached its highest in more than seven years on Friday, with an ounce of gold worth 80 ounces of silver, against 76.7 ounces at the start of the year.