Gold News

Gold Price Extends Gains, Fed to Keep Rates Near Zero for 2 Yrs

Chris Mullen at GoldSeek wraps up Tuesday's action...

The Gold Price climbed as much as $69.09 to a new all-time high of $1779.39 at about 5:20am EST on Tuesday, before falling back to as low as $1719.25 by late morning in New York, but it then rallied back higher in the last two and a half hours of trade and ended with a gain of 1.73%.  

The Euro Gold Price climbed to a new record high at about €1222.

The Silver Price fell to as low as $37.508 before it also bounced back higher in late trade, but it still ended with a loss of 3.81%.

Silver and Gold Mining stocks rose almost 2% at the open before they fell back near unchanged by midmorning and then saw slight losses immediately after the statement from the US Federal Reserve (see below), but they ultimately rose to new highs in late trade and ended with over 4% gains.

The Fed kept the federal funds rate in its record low range of 0.00% to 0.25% as expected. They also pledged to keep rates exceptionally low until at least mid-2013 (should economic conditions warrant it – which they expect), and that caught many by surprise. 

From the statement:

"The committee currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013."

This marks a notable change from the Fed's previous language of keeping rates low for an "extended period" or for the "foreseeable future" and essentially sets a target date for the possibility of higher rates to about two years from now. 

The Federal Open Market Committee also discussed a range of policy tools to bolster the economy and is "prepared to employ these tools as appropriate".

Platinum gained $30.50 to $1747.25 in Tuesday's trade, and copper rose slightly to about $3.97.

Oil saw slight gains in early trade on OPEC's rosy demand forecast, but it then fell and ended with a notable loss at under $80 a barrel following the fed’s grim economic outlook.

The US Dollar fell in early trade on speculation about what the Fed may say, and then fell even further following their statement.  The Swiss Franc exploded to new highs.

US Treasuries reversed early losses and shot higher following the Fed's statement as yields plunged to historic lows on worries about slow economic growth.  Today’s $32 billion 3-year note auction sold at a high yield of 0.50% with a bid to cover of 3.29.

The Dow, Nasdaq, and S&P ended nicely higher in extremely volatile and mixed trade.

Among the big names making news in the market Tuesday were AOL, Apple, Dish Network, Goldman Sachs, and HSBC.

Wednesday at 10am EST brings Wholesale Inventories for June expected at 1.0% and at 2pm is the Treasury Budget for July expected at -$132.0 billion.

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Chris Mullen is chief content manager of the GoldSeek family of websites, a leading source of gold news, comment and mining-stock data for private and institutional investors.

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