Gold turns higher after Swiss National Bank cuts rates

Investing.com - Gold rose to the highest levels of the session on Thursday, after the Swiss National Bank lowered interest rates further into negative territory.

Lower interest rates can give gold a lift, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery picked up $2.60, or 0.21%, to trade at $1,237.10 a troy ounce during European morning hours. Prices held in a range between $1,226.20 and $1,239.60.

A day earlier, gold hit $1,244.60, the most since October 23, before settling at $1,234.50, up 10 cents, or 0.01%.

Futures were likely to find support at $1,217.50, the low from January 12, and resistance at $1,250.20, the high from October 22.

Also on the Comex, silver futures for March delivery shed 3.3 cents, or 0.19%, to trade at $16.95 a troy ounce.

The SNB announced that it will discontinue the minimum exchange rate of 1.20 per euro, while lowering interest rates further into negative territory, sending the franc sharply higher.

The dollar plunged 12% against the franc (USD/CHF), while the euro tumbled 14% (EUR/CHF).

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, turned lower following the surprise decision, trading down 0.6% at 91.75.

Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

Investors looked ahead to weekly data on initial jobless claims, as well as reports on producer prices and manufacturing activity in the Philadelphia region, for further indications on the strength of the economy.

Data on Wednesday showed that retail sales in the U.S. dropped by the most in 11 months in December, suggesting that the Federal Reserve could keep rates on hold for longer.

A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.

The precious metal lost nearly 2% in 2014 amid indications a strengthening U.S. economic recovery will force the Fed to start raising interest rates sooner and faster than previously thought.

Elsewhere in metals trading, copper for March delivery climbed 3.8 cents, or 1.52%, to trade at $2.544 a pound.

A day earlier, copper hit $2.423, a level not seen since June 2009, before settling at $2.505, down 13.8 cents, or 5.24%, as concerns over the global economic outlook and the impact on future demand prospects dampened the appeal of the commodity.

Meanwhile, oil futures resumed their decline on Thursday, as market players continued to focus on a glut in global supplies.

London-traded Brent prices fell $1.31, or 2.64%, to $48.55 a barrel, while Nymex oil sank 86 cents, or 1.78%, to end at $47.62.