By Kevin Crowley and Ranjeetha Pakiam
Gold climbed, snapping the biggest two-day loss since March, as expectations for more central bank stimulus boosted demand for an alternative to currencies. Silver also rose.
Economists predict the Bank of England will cut interest rates on Thursday to limit the economic fallout of the country’s vote to leave the European Union, while Japanese Prime Minister Shinzo Abe has ordered more fiscal stimulus. Low interest rates are typically good for gold as they reduce the opportunity cost of owning the precious metal.
Gold rose even even as global stocks advanced before Theresa May takes over as U.K. prime minister later Wednesday.
“The difficult process of negotiating the U.K.’s withdrawal from the EU is still to begin and further uncertainty could weigh on sterling and the euro in the months ahead,” Jonathan Butler, a precious metals strategist at Mitsubishi Corp. in London, said in a report. “Global geopolitical and economic concerns will help keep U.S. interest rates on hold and therefore maintain a favorable real rate environment for bullion.”
Bullion for immediate delivery climbed 0.5 percent to $1,340.09 an ounce by 12:40 p.m. in London, according to Bloomberg generic pricing. Prices dropped 2.4 percent in the previous two days after touching a two-year high.
Federal Reserve Bank of St. Louis President James Bullard said Tuesday he thought the Brexit decision wouldn’t have a lasting effect on the world’s largest economy. Traders are pricing in only a 4 percent probability of a rate rise this month and the odds of a move by December are at 34 percent.