Gold inched higher on Friday, on track for a gain of more than one per cent in July, as the dollar extended its losses after the Bank of Japan’s stimulus fell short of market expectations.
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Haruhiko Kuroda, governor of the Bank of Japan, announces the modest stimulus.
The German DAX and the U.K.’s FTSE 100 both dropped about 0.4 percent while France’s CAC 40 index slipped 0.6 percent.
The yen was last up 1.1 percent at 104.11 per dollar, with all eyes on the BOJ’s policy decision, which is usually announced some time between 0230 GMT (10:30 p.m. EDT) to 0500 GMT (01:00 a.m. EDT).
United States gold was up 0.4 per cent at $1,337.90 an ounce.
Four in five economists predict additional stimulus today – with an increase in purchases of exchange-traded funds the most likely option, followed by a deeper cut in the negative deposit rate.
After Japan’s Prime Minister Shinzō Abe unveiled his stimulus package “the market is now speculating whether this will be complemented by an announcement of further monetary stimulus from the Bank of Japan tomorrow”.
The BoJ’s meeting comes on the heals of news on Wednesday of a whopping 28 trillion yen ($266 billion) government stimulus package aimed at shoring up the world’s third-largest economy.
The Nikkei 225 stock index dropped almost 2 percent but later regained some lost ground, trading 0.7 percent lower by mid-afternoon Friday.
The government and the Bank of Japan must work together to support the economy, the country’s economy minister was quoted as saying by Japanese media in the wake of premier Shinzo Abe’s announcement of a bigger-than-expected fiscal spending package.
Ahead of the central bank’s decision, Japan reported further signs of weakness in its economy in June, with industrial output and consumer spending falling from the year before.
Nonetheless, even if the BOJ moves, it is uncertain whether the scale and the form of policy easing will boost confidence and drive the financial markets in the right direction, given that investors’ expectations for easing have been exceptionally high ahead of this meeting. The Standard & Poor’s 500 index rose 3.48 points, or 0.2 percent, to 2,170.06 and the Nasdaq composite rose 15.17 points, or 0.3 percent, to 5,154.98.
The Fed, meanwhile, said on Wednesday after its two-day policy meeting that it was less anxious about possible shocks to the US economy, suggesting that a hike as early as September was not out of the question though not signalling it clearly.
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Separate data showed average monthly household spending in June decreased an inflation-adjusted 2.2 percent from a year earlier to ¥261,452 ($2,496) for the fourth consecutive month of decline, the ministry said.
