MW: Gold extends gains as dollar falls further after Fed
By Moming Zhou, MarketWatch
NEW YORK (MarketWatch) -- Gold futures extended gains as the U.S. dollar fell further against its major rivals after the Federal Reserve slashed its key interest rate to just about zero to save the U.S. economy.
Gold for February delivery, the most active contract, finished up $6.20, or 0.7%, at $842.70 an ounce on the Comex division of the New York Mercantile Exchange. The Fed made its announcement after gold's floor trading closed. The metal surged to as high as $857.50 an ounce in after-hour electronic trading.
The December contract, which expires on Dec. 29, also moved higher. Open interest, or the number of outstanding contracts of the December contract, stood at 831 as of Monday, or 83,100 ounces, according to Comex data.
The Fed's Federal Open Markets Committee established its target rate 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%.
"Overall, the outlook for economic activity has weakened further," the FOMT said in its statement.
The dollar extended its losses after the Fed decision, adding more upward pressures on gold prices. The dollar index fell as much as 2%. It was down 1% before the Fed's announcement. Currencies.
Gold's gains "match the fall in the dollar all the way" after the Fed announcement, said Julian Phillips, editor at GoldForecaster.com.
The greenback and dollar-denominated gold prices often move in the opposite direction.
The U.S. dollar has been losing ground against its major rivals on widespread expectations of the rate cut, effectively boosting dollar-denominated gold prices.
The precious metal gained 9% last week, the biggest weekly advance in nearly three months. On Monday, the benchmark contract rallied 2% to close at $836.50, the highest level in two months.
Still, gold is about 16% lower than its record high above $1,000 an ounce, hit last March.
In spot trading, the London afternoon gold-fixing price -- a benchmark for gold traded directly between big institutions -- stood at $838.25 an ounce Tuesday afternoon, up $12.25 from Monday afternoon.
Holdings in the SPDR Gold Trust, the largest gold exchange-traded fund, stood at 765.23 tons on Monday, up 3.06 tons from a day ago, according to the latest data from the fund. The SPDR Gold Trust added 1.7% to $84.
As for trading in other metals, March silver futures fell 0.8% to close at $10.705 an ounce. January platinum gained 1.2% to $849.50 an ounce, and the March contract for sister metal palladium rose slightly to $177.55 an ounce.
March copper lost 1.9% to $1.3785 a pound.
On the equities side, the Amex Gold Bugs Index , which tracks the share prices of major gold companies, added 5.8% to 289.59.
The iShares Gold Trust , an exchange-traded fund, rose 1.7% to $84.01, while the iShares Silver Trust ETF gained 2.9% to $10.86. The Market Vectors-Gold Miners ETF advanced 4.6%, reaching $31.70.
