Gold Rallies as Bank of Japan Holds Policy Steady

June Comex Gold futures rose to its highest level in a week as the Bank of Japan held monetary policy steady, sending the USD/JPY sharply lower, and after the Federal Reserve signaled that it was in no rush to tighten monetary policy.

The Fed left interest rates unchanged after its two-day meeting on Wednesday and, while keeping the door open to a hike in June, showed little sign it was in a hurry to tighten policy amid an apparent slowdown in the U.S. economy.

The US Dollar Index came under further pressure after the Bank of Japan defied market expectations for more monetary stimulus, boosting the yen. The subsequent nearly 3 percent fall in the USD/JPY was its biggest daily drop since August 2015.

June Crude Oil futures were relatively steady throughout the session. Although the weaker dollar was supportive, profit-taking put a lid on any upside action. However, this weakness is expected to be short-lived because the possibility of supply disruptions, strong investor appetite and a weakening U.S. Dollar could push prices higher soon.

In a delayed reaction, record storage figures may have spurred some investors to take profits on Thursday by closing positions betting on a rise in prices. Government data on Wednesday showed that U.S. crude stocks climbed 2 million barrels last week to an all-time peak of 540.6 million barrels.

Outside events are also helping to support higher prices. Currently, there are supply risks from Venezuela, which is facing a severe electricity crisis. Falling U.S. output has also been a supporting factor in oil’s recovery.

According to the U.S. Energy Information Administration (EIA) data showed that crude production fell to 8.94 million barrels per day (bpd) last week, down almost half a million bpd from last year.

Along with gold and crude oil, the weaker dollar helped drive the Euro and British Pound higher. Both are being aided by short-covering after the Fed’s interest rate and monetary policy decision, however, the GBP/USD is also being supported by polls which suggest that more Brits are leaning towards the U.K. remaining a member of the European Union.

U.S. stocks traded mixed Thursday, shaking off pressure from sharp declines in Asia and Europe overnight after the Bank of Japan kept policy unchanged. The S&P 500 Index attempted to show gains with information technology leading advancers. The Dow Jones Industrial Average traded about 20 points lower after earlier falling more than 100 points soon after the open. Finally, the NASDAQ 100 traded higher as shares of Facebook briefly rose more than 10.5 percent to hit a fresh all-time high in intraday trade.