Gold turns higher after Bank of England cuts rates

By Jan Harvey

LONDON (Reuters) - Gold prices turned higher on Thursday after the Bank of England cut interest rates for the first time since 2009, though gains were muted by strength in the dollar after the previous day's upbeat U.S. jobs data.

In addition to the cut in rates to a record low 0.25 percent, the BoE said it would buy 60 billion pounds of government debt to ease the blow from Britain's June 23 vote to leave the European Union.

Spot gold was up 0.4 percent at $1,362.60 an ounce at 1350 GMT, off an earlier low of $1,348.50, while U.S. gold futures for December delivery were up $4.30 an ounce at $1,369.00.

Gold is highly sensitive to falling interest rates, which cut the opportunity cost of holding non-yielding bullion.

"The revision in expectations for monetary policy in the U.S., Japan, the euro zone and the UK has played a big role in the rise in the gold price so far this year, and we expect it to continue," Capital Economics analyst Simona Gambarini said.

"Monetary policy in the UK, euro zone and Japan is likely to remain extremely accommodative... that should be good for the price of gold, despite the fact that they are less of an important factor than the Federal Reserve decision. They all add up to a general low or negative rate environment."

Further policy loosening in the UK helped push European shares up 0.6 percent, while the dollar rose 0.2 percent against a currency basket, drawing strength from a stronger-than-expected ADP jobs number on Wednesday.

The ADP report raised speculation that the U.S. non-farm payrolls on Friday may be strong enough to revive expectations for a Fed interest rate hike later this year, after it lifted rates for the first time in nearly a decade in December.

The Fed has indicated that the pace of rate hikes will largely be dictated by economic data, with the monthly non-farm payrolls numbers one of the most closely watched data points.

"The ADP report gave some hopes for the employment report on Friday," ABN Amro analyst Georgette Boele said. "Now we have to see how the report is going to be tomorrow."

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, eased 0.3 tonnes to 969.65 tonnes on Wednesday. [GOL/ETF]

Among other precious metals, silver was down 0.1 percent at $20.35, while platinum was 0.5 percent lower at $1,153.50 and palladium was up 0.3 percent at $711.40 an ounce.

(Additional reporting By Nallur Sethuraman in Bengaluru; Editing by Ruth Pitchford and Alexnadra Hudson)