Gold prices rose sharply and hit a nearly 6-month high on Tuesday as the dollar fell after the Bank of Japan announced a surprise shift in its yield curve policy that heralds a possible monetary tightening.
The Yen firmed after the BoJ’s policy shift, weighing on the greenback. The dollar index dropped to 103.78 around mid morning and despite subsequently recovering to 104.00 was still down more than 0.6% from the previous close.
Gold futures for February ended higher by $27.70 at $1,825.40 an ounce.
Silver futures for March ended up $1.072 at $24.271 an ounce, while Copper futures for March settled at $3.7990 per pound, up $0.0160 from the previous close.
The dollar fell as the BOJ tweaked their curve policy, which signaled they are nearing the end to their ultra-easing monetary policy stance.
“The widening of Japan’s yield curve band signifies that we could have a peak in the dollar put in place,” says OANDA’s senior market analyst Edward Moya.
He added, “The dollar might be in the house of pain for a while and that should be good news for bullion. Holiday trading volumes might disrupt this rally but for now it seems like gold has definitely got its groove back.”
In U.S. economic news, a report from the Commerce Department showed housing starts fell by 0.5% to an annual rate of 1.427 million in November after tumbling by 2.1% to a revised rate of 1.434 million in October.
Economists had expected housing starts to decline by 0.7% to a rate of 1.415 million from the 1.425 million originally reported for the previous month.
The Commerce Department also said building permits plunged by 11.2% to an annual rate of 1.342 million in November after slumping by 3.3% to a revised rate of 1.512 million in October.
Building permits, an indicator of future housing demand, were expected to dive by 3.7% to 1.470 million from the 1.526 million originally reported for the previous month.
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