Gold fluctuates near multi-year highs above $1380, adds more than $20 on the day
|- Dovish shift in major central banks' policy outlook boosts demand for gold.
- US Dollar Index drops to fresh 2-week lows on Thursday.
- Stock market rally keeps precious metal's gains limited for now.
With major central banks adopting a more cautious tone with regards to the economic outlook and hinting at rate cuts this week, gold became an investor favourite and the troy ounce of the precious metal rose more than $50 since the start of the week to touch its highest level since September 2013 at $1393.27. Following that impressive rally, the XAU/USD pair has gone into a consolidation phase and was last seen trading near $1383, still adding more than $20 on a daily basis.
Earlier this week, European Central Bank President Draghi opened the door for rate cuts while speaking at the bank's event in Portugal. Yesterday, the FOMC dropped the term "patient" from its policy statement with regards to future policy adjustments and gave a reason for markets to believe that a rate cut will happen as early as July. The greenback came under heavy selling pressure and dragged the US Dollar Index to its lowest level in two weeks.
During the Asian session on Thursday, Bank of Japan Governor Kuroda said that it was possible for them to keep the rates at current lows beyond spring of 2020. Finally, the Bank of England today in its policy statement acknowledged that downside risks to growth had increased since the last meeting in May and revised its second-quarter growth expectation down to 0% from 0.2%.
Meanwhile, stock markets capitalized on hopes of central banks injecting additional stimulus into the economy and the S&P 500 Index hit an all-time high, grabbing investors' attention and keeping gold's gains limited for the time being. At the moment, all three major indexes of Wall Street are rising around 1% on a daily basis.
Technical levels to watch for
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