From Chris Mullen at GoldSeek.com...
Gold Prices had dropped all the way down to $849.22 per ounce in Asia on Tuesday, but a surprise inter-meeting interest rate cut from US Federal Reserve of 0.75% sent it surging to $894.30.
The Gold Market then slipped back but ended the session with a gain of 0.90% from last Friday's close, some 4.9% above the overnight low.
Silver failed to gain after falling as low as $15.19, ending with a loss of 0.44%.
The Gold Price in Euros rose above €609 per ounce, platinum gained $4 to $1548, palladium gained $5 to $368, and copper ended well off its early lows near $3 at about $3.23.
Gold and silver mining equities fell more than 4% at the US open, but they quickly rallied back and found over 1% gains about an hour into trade and rose even further in afternoon trade to close with over 2% gains.
"With the slashing of US interest rates and perhaps a more vigorous package of stimulants from President Bush, the game has changed," says respected Gold Market analyst and investor Julian D.W. Phillips.
"Here at the GoldForecaster.com we expect financial volatility as never before seen. We also expect growing turmoil in the global economy as the shifts in hot money and uncertainties we all now face disturb the financial world.
"After all these, the Fed and White House's moves are not curative, they are defensive. They will not re-build confidence but are designed only to stop it falling further. How can Gold Prices not benefit from them?"
The Fed's 75-basis point cut to 3.5% is the largest cut since October 1984 and marks the first inter-meeting cut since the markets reopened following the 9/11 attacks ofd 2001. William Poole was the lone dissenter in the Fed's decision; he wanted to wait until the Fed's meeting next week. That may mean another cut of at least 0.25% is due on Jan. 30th.
The Bank of Canada also cut rates on Tuesday, but only by 25 basis points at a scheduled meeting. Attention now turns to the Bank of England and the European Central Bank to see if they will follow suit on Feb. 4th. Many commentators are hoping for action before then, however.
Back in the markets, crude oil fell some $3 per barrel on Tuesday before it rebounded, yet it still closed almost $1 lower as traders debated whether the Fed's cut will help energy demand or if it signifies a larger economic problem than previously thought.
The US Dollar index fell and Treasury bonds rose strongly in reaction, pushing the yield on the 10-year to its lowest since 2003.
The Dow plummeted 465 points at the open and the Nasdaq and S&P followed suit, but all three indices soon rallied off their early lows and ended with only about 1% losses.
There are no major economic reports due out on Wednesday.
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