Capital Gold Group Report: Gold Rises as U.S. Dollar Falls Sharply
NEW YORK
(MarketWatch) -- Gold futures rallied Wednesday, with most other metals
also posting gains, as the U.S. dollar fell sharply against other major
currencies.
Silver futures rallied more than 7%.
Gold for February delivery surged $30.20, or 4%, to $872.90 an ounce in
electronic trading on Globex. Earlier, the contract hit an intraday
high of $873.20 an ounce.
Gold gained on the back of sharp weakness in the U.S. dollar.
The greenback fell sharply against all its major rivals Wednesday, a
day after the Federal Reserve decided to cut interest rates to historic
lows and expand a program of extraordinary lending and other measures
to attempt to lift the U.S. economy out of recession.
The dollar index, measure of the U.S. dollar against a trade-weighted basket of six
currencies, fell 1.8% to 78.54, down from 79.921 in North American
activity late Tuesday.
"Note how rising risk aversion continues to fail in propping the dollar
as was the case since the beginning of the market turmoil," said Ashraf
Laidi, chief market strategist at CMC Markets.
"Considering the Fed's yield assault on the dollar, foreign exchange
traders are no longer focusing on the woes of a bankrupt U.S. auto
industry," Laidi said in a note.
On Tuesday, gold ended up $6.20, or 0.7%, at $842.70 an ounce on the New York Mercantile Exchange.
After the close of gold trading Tuesday, the Federal Reserve
established its target range for the federal funds rate of 0 to 0.25%,
effectively cutting its key rate for overnight lending to banks by
between 0.75% and 1%.
"The Federal Reserve has embraced 'Helicopter Bernanke's' inflate or
die massive reserve and money creation academic theories in an attempt
to prevent deflation," said Mark O'Byrne, executive director at Gold
and Silver Investments Ltd., referring to Fed Chairman Ben Bernanke.
"Markets realize that this will lead to a lower dollar and higher gold
prices in the medium and long term," O'Byrne said in a research note.
Also on the Globex, March silver futures rose 77 cents, or 7%, to
$11.45 an ounce, and January platinum futures gained $17.50, or 2%, to
$867 an ounce.
March palladium futures rose $2.95 to $180.50 an ounce, while March copper futures fell 3 cents to $1.35 a pound.
Elsewhere in the commodity markets, crude futures were little changed
at $43.67 a barrel, as traders awaited an official announcement on a
production cut from the Organization of Petroleum Exporting Countries.
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