Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— Gold edged up 30 cents to hold above $1,116 despite rising risk-appetite after the Bank of Japan shocked markets by adopting negative interest rates. Gaining 1.8% this week and 5.3% this month, gold enjoyed its strongest monthly rise in a year as slowing global growth and heightened volatility in stocks drives investors into safe-haven assets.

In a surprising and perhaps desperate action, the BOJ cut a key interest rate on deposits into negative territory in hopes of stoking inflation and stimulating its intractably stagnant economy. After years of aggressive monetary easing, Japan's inflation rate was just 0.1% in the year through December.

The ECB was the major central bank to cut rates below zero back in 2014. Others soon followed suit, including the Swiss National Bank. Japan's decision to join them is raising concerns that deeper cuts and more easing may result in Europe, possibly triggering a currency war in which nations reactively cheapen their currencies to gain an advantage in the shrinking pool of global trade.

This outcome would complicate the Fed's ability to raise interest rates again this year, something that is already being question in light of slower growth, tumbling equity markets, and plummeting oil prices. Amplifying Wednesday's dovish Fed policy statement, Dallas Fed chief Richard Kaplan acknowledged today that these are all good reasons to be patient about lifting rates.

Equities jumped on the prospect of more liquidity entering the market, with the Dow gaining more than 2% and the Global Dow 1.8%. The surge in risk appetite came despite data showing the U.S. economy grew merely 0.7% in the fourth quarter.

The dollar surged 1% against a basket of rivals, putting a cap on gold's gains. A rising dollar typically pressures gold and other commodities denominated in it for international trade.

The other precious metals were higher on the day but mixed for the week and month. Silver inched up a penny today, gaining to 1.3% for the week and 3.5% for the month. Platinum rose 0.7% for a weekly gain of 5.1% but lost 2% this month. Palladium jumped 1.3% today but lost 0.3% on the week and 11.6% on the month.

At the Comex close: April gold added 30 cents, $1,116.40; March silver inched up a cent to $14.24; April platinum gained $6.40, or 0.7%, to $874.30; March palladium rose $6.50 to $498.50 an ounce.