Gold News

Gold biggest winner as Fed cuts 0.5%

After weeks of anticipation the US Federal Reserve cut interest rates by 50 basic points to send stocks soaring, with those choosing to buy gold bringing the price of the precious metal to a 27-year high.

Overall rallying of stocks was the highest in four years, but by cutting the interest rate down to 4.75 per cent yesterday (September 18th), the likelihood of increased credit availability weakening the dollar made gold the most attractive investment prospect.

Gold futures for December delivery jumped $11.70, or 1.6 percent, to $735.50, as the rush to invest in the gold market gave the precious metal yet another boost after the positive surge of spot gold prices through the $700 barrier last week.

Overall the Dow Jones Index gained 2.51 per cent, its largest daily growth since 2003, with renewed faith in money-lending helping shares in banks like Citigroup and JPMorgan Chase to jump as much as five per cent.

Ben Bernanke, chairman of the Federal Reserve, last month warned stock markets that it was not the organization's responsibility "to protect lenders and investors from the consequences of their financial decisions", but yesterday's rate cut suggests otherwise.

Meanwhile in Britain, decisions by the Bank of England and the government to back all savings in troubled bank Northern Rock provided further evidence of worried global banking systems showing willingness to protect and support prominent lenders.

News then in the stock markets is good in the short term, but with the likelihood of dollar devaluation in the wake of rate cuts, the future is especially bright for gold.


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