Gold prices took a big jump Wednesday, topping $1,700 an ounce on word the the Fed extended their pledge to keep interest rates at extremely low levels til late 2014. This moves helps boost demand for precious metals as a hedge against inflation.
Jan. 25, 2012, 2:39 p.m. EST
By Myra P. Saefong and V. Phani Kumar
SAN FRANCISCO (MarketWatch) — Gold prices finish sharply higher Wednesday, topping $1,700 an ounce, as the Federal Reserve’s monetary-policy committee extended its pledge to keep interest rates at exceptionally low levels till late 2014, which will help boost demand for the precious metal as an inflation hedge.
Silver futures led the percentage gains among the major metals, with prices settling at their highest since mid-November.
“It looks like someone awoke to the fact that loose monetary policy will eventually impact the value of the dollar and allow gold to move higher,” said Jeffrey Wright, managing director at Global Hunter Securities.
Gold futures for February delivery GC2G +2.82% rallied by $35.60, or 2.1%, to settle up to $1,700.10 an ounce on the Comex division of the New York Mercantile Exchange.
That was the first close above $1,700 for a most-active contract since Dec. 9 and the biggest one-day percentage gain Jan. 3.
On Wednesday, the Federal Reserve pledged to hold rates low until late 2014. The new commitment replaces the statement that economic conditions were likely to stay at the historic low range of 0% to 0.25% until at least mid-2013.
“The Fed telling us no rate increase to at least 2014 is a sharp rally promoter for gold, as low interest rates to continue will make gold a good alternative hold and not expensive to maintain,” wrote George Gero, a vice president with RBC Capital Markets, in an emailed note.
Gold prices had been on the decline, trading as low as $1,649.20, pressured by strength in the dollar. Gold prices turned higher immediately before the Fed announcement and then added to those gains after the statement as the U.S. dollar weakened.
The U.S. dollar index DXY -0.40% was last at 79.660, down from the day’s high of 80.355 and below the 79.853 from late Tuesday.
Gold had lost $13.80 in Tuesday’s regular Comex session.
“The fundamentals for gold are still very bullish with interest rates at historical lows, massive government spending and loose monetary policies; inflation will begin to raise its head and people will be seeking yield over the coming months and years,” according to James Carrillo, senior portfolio adviser for precious-metals investment firm Swiss America Trading Corp.
Other metals moved higher along with gold, with silver the standout.
The March contract for silver SI2H +3.89% jumped $1.15, or 3.6%, to settle up to $33.12 an ounce. That was the highest settlement price for a most-active contract since Nov. 16.
March copper HG2H +1.10% added 2.2 cents, or 0.6%, to end at $3.83 a pound and March palladium PA2H +1.84% rose $12.80, or 1.9%, to $693.35 an ounce.
April platinum futures PL2J +2.10% closed up $27.20, or 1.8%, at $1,579.60 an ounce.
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