On Wednesday, gold futures for February delivery jumped $35.60 to settle at $1,700.01 per ounce, while silver futures surged $1.15 to close at $33.12.
Both precious metals received a jolt from the Federal Reserve’s latest statement. The Federal Reserve announced on Wednesday that it will not increase its benchmark interest rate until at least late 2014, saying that record-low rates are still needed to help boots the still sluggish economy. After a two-day meeting of the Federal Open Market Committee, the central bank said the economy is growing moderately, despite slowing global growth.
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Economists believe the extended time frame for low rates could lead to further Fed action to try to stimulate the economy, but today the Fed held off on any further bond-buying programs to fuel growth. Other than pledging to keep its key rate at a record low well beyond the earlier mid-2013 target, the central bank’s statement today closely tracked its previous comments about economic conditions, using the same language to describe Europe’s debt problems and their impact on the global economy.
While the Fed’s latest statement ensures negative interest rates and U.S. dollar devaluation for the coming years, gold and silver investments jumped on the news. In afternoon trading, the SPDR Gold Trust increased 2.6 percent, while the iShares Silver Trust jumped more than 4 percent. Gold miners such as Barrick Gold and Newmont Mining gained 6.5 percent and 4.7 percent, respectively. Shares of Yamana Gold surged more than 10 percent. Silver miners such as First Majestic and Endeavour Silver both climbed more than 6 percent.
“We were all under the assumption that rates would be held at a low level until 2013, but now with the date extended to 2014, it’s inherently bullish for gold,” said Ralph Preston, senior market analyst with Heritage West Financial.
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- Federal Open Market Committee
- The Federal Reserve