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Gold Prices Jump To Over Five-year Highs

Gold prices jumped on Thursday to hit over five-year highs amid increased geopolitical tensions and on expectations of a worldwide wave of central bank stimulus.

Spot gold jumped 1.5 percent to $1,381.18 per ounce, after hitting its highest level since March 17, 2014 at $1,386.38.

U.S. gold futures were up 2.7 percent at $1,384.65 an ounce, after touching their highest since April 2018 at $1,397.70.

Tensions flared in the Middle East after a U.S. military surveillance drone has been shot down by Iranian forces while flying over the Strait of Hormuz.

Iran's elite Revolutionary Guard (IRGC) force said it had shot down an "intruding American spy drone". U.S. officials said the drone was in international territory at the time.

On Wednesday, the U.S. Federal Reserve signaled it was ready to lower interest rates, sending the dollar lower and U.S. Treasury yields plunging.

Fed officials now think it is appropriate to lower the benchmark overnight rate by a half a percentage point by the end of 2019.

The European Central Bank is also considering new stimulus as the euro zone battles with low inflation and weak growth.

"We in the Governing Council are ready to act as appropriate unless there is improvement in the economic conditions," ECB Governing Council member Olli Rehn, who is seen as a possible successor to Mario Draghi as head of the ECB, told a conference in Brussels.

Lower interest rates boost gold by reducing the opportunity cost of holding non-yielding bullion.

The U.S. dollar fell across the board today and remains on track for its biggest two-day drop this year in response to the FOMC statement.

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