Gold jumps as surprise BOJ decision to stand pat batters dollar

[SINGAPORE] Gold climbed, rebounding from an earlier decline, after the Bank of Japan unexpectedly held off on expanding stimulus, hurting the dollar.

Bullion for immediate delivery advanced as much as 0.4 per cent to US$1,250.35 an ounce and traded at US$1,247.66 at 12:22 pm in Singapore, according to Bloomberg generic pricing.

Before the BOJ's decision, gold had been as much as 0.6 per cent lower, and it's now headed for a fourth day of gains, the longest run since February.

Gold has risen 18 per cent this year, partly as central bankers in Japan and Europe deepened stimulus in an effort to kick start growth, and also as investors scaled back expectations for US rate increases.

The BOJ decision tohold off came as a surprise to the slight majority of economists surveyed by Bloomberg, who'd projected additional action. The Bloomberg Dollar Spot Index fell 0.5 per cent as the yen rallied.

"A weaker dollar index, due to a stronger yen, as the BOJ decided not to introduce more stimulus at its board meeting today has provided support to gold prices," Vyanne Lai, an economist at National Australia Bank Ltd, said by e-mail

"It appears that the BOJ is preferring to take some time to assess the effectiveness of the negative interest rate introduced three months ago."

The Federal Reserve on Wednesday left its benchmark rate unchanged for the third meeting since starting a tightening cycle in December, in line with expectations, and policy makers reiterated that rate increases will be gradual.

Holdings in exchange-traded funds backed by gold rose 1.6 metric tons to 1,755.6 tons on Wednesday, data compiled by Bloomberg show.

Bullion of 99.99 per cent purity was little changed at 260.8 yuan a gram on the Shanghai Gold Exchange.

Spot silver climbed 0.4 per cent to US$17.3013 an ounce.

Platinum rose 0.4 per cent, while palladium added 0.3 per cent.

BLOOMBERG