22
Sep
2010

Gold Surges to Record Near $1,300/oz on Fed Statement

Gold

Gold surged after the Fed statement yesterday indicating that interest rates would remain at 0 to 0.25% and will remain exceptionally low for an extended period. No change in policy was announced but some market participants have interpreted the statement to mean that the Federal Reserve may embark on a new round of quantitative easing. The dollar fell sharply on the announcement and gold surged from $1,272.40/oz to a new record over $1,290/oz or 1% in the following hour. Silver surged more, rising from $20.62/oz to over $21.00/oz or 2% in the minutes after the announcement – a new 30 year high (see long term quarterly silver chart below).

Gold is currently trading at $1,291.30/oz, €964.87/oz, £823.71/oz.

Gold in USD – 5 Day (Tick). Click on image to view full size.

The dollar has fallen to near 80.0 on the US Dollar index after the Federal Reserve’s "prepared to provide additional accommodation if needed" comments. Some investors are selling dollar assets as they are receiving poor yields for dollar denominated assets despite rising risk and concerns that QE2 could lead to dollar debasement.
 
Gold has stayed well bid and close to yesterdays record highs overnight and this morning. $1,300/oz would seem "backed in the cake" in the coming days but there could be a pullback from the $1,300/oz level when reached. However, gold’s bull market looks set to continue until interest rates return to more normal levels and concerns about a double dip recession and sovereign debt issues abate.

Silver

Silver is currently trading at $21.05/oz, €15.74/oz and £13.43/oz.

Silver in USD – 40 Years (Quarterly). Click on image to view full size.

Platinum Group Metals

Platinum is trading at $1,624.50/oz, palladium is at $538/oz and rhodium is at $2,300/oz.

Mark OByrne