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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