Gold climbs higher after ECB cuts rates

Gold made over $20 in gains after being boosted on Thursday on news that the European Central Bank continues with stimulus measures and cut the main interest rate to 0.50 percent from 0.25 percent.

Gold for June delivery has recovered quite a bit of recent losses and climbed to a high of $1,478 by early European session trading on Friday, up over $21, or 1.5 percent. It had posted a decline of about $25 on Wednesday.

With central banks increasingly adopting looser monetary policy and flooding the financial system with money, this pushes investors to the safe haven precious metal.

Analysts have attributed recent strength in gold prices to expectations the Fed and the ECB will continue with their easy-monetary policies, as well as to stronger demand for physical gold.

“Easy” monetary policies tend to raise the risk of inflation and gold is seen as an inflation hedge.

Also, quantitative easing tends to weaken the dollar and this makes gold priced in USD cheaper to buy for investors holding foreign currency.

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