Gold rose in Asia on Friday ahead of a Bank of Japan review on monetary policy that will be watched for the scope of any easing efforts.
On the Comex division of the New York Mercantile Exchange, gold for December delivery rose 0.22% to $1,344.15 a troy ounce.
Silver futures for September delivery gained 0.35% to $20.263 a troy ounce, whilecopper futures for September delivery nudged down 0.09% to $2.214 a pound.
Investors are cautious that the Bank of Japan could fail to meet market expectations by approving only slight easing measures. While Japan prime minister Shinzo Abe unveiled a broad ¥28 trillion stimulus plan on Wednesday, Reuters reported that the Japanese government may only provide as much as ¥7 trillion in direct fiscal stimulus. If Abe is unable to deliver on promises of jump starting the economy with a broad stimulus initiative, the Japanese Central Bank could feel added pressure to lower interest rates deeper into negative territory. The yen has gained nearly 13% against the dollar year-to-date.
Overnight, gold pared gains after hitting two-week highs on Thursday, as market players digested signals that the Federal Reserve could avoid a near-term interest rate hike and looked ahead to the closely-watched meeting from the Bank of Japan.
Gold spiked in Wednesday’s after-hour session after the Federal Open Market Committee (FOMC) left its benchmark Federal Funds Rate unchanged at a level between 0.25 and 0.50% at the conclusion of its July monetary policy meeting. Despite noting that near term risks to the economic outlook have diminished over the last month, the FOMC said it still expects that economic conditions may only warrant gradual increases in short-term interest rates in the coming months.
For the most part, markets interpreted the statement as a dovish indication that the FOMC could delay the timing of its next rate hike beyond their meeting in September. Following the release, the CME Group’s (NASDAQ:NASDAQ:CME) Fed Watch tool lowered the probability that the FOMC could raise interest rates in September to 18%, down from 20.3% earlier in the session.