(RTTNews) - Gold surged to a two-month high on Wednesday as investors had their first chance to react to the Federal Reserve's historic interest rate cut. February gold rose to $861.50, up $18.90 for the session. Prices climbed to $865 in electronic trading, its highest level in nearly two months.
The dollar skyrocketed versus the sterling but lingered near lows against the other majors, remaining near a 2 1/2 month low against the euro and a 13-year low versus the yen. Gold usually moves opposite the dollar because of the precious metal's hedge appeal.
The greenback showed mixed performance against its major opponents following the release of the third quarter current account balance report that posted a deficit of $174.1 billion. While, the greenback edged down against the franc it remained steady against the rest of majors.
Also on the economic front Wednesday, the Mortgage Bankers Association revealed that its market index of mortgage application volume rose 2.9 percent on a seasonally adjusted basis for the week of December 12th. The Market Composite Index was 841.4 compared to 817.7 last week. Last week's number was upwardly revised from the originally reported 796.8. On an unadjusted basis the Index rose 2.9 percent and was up 37.3 percent on a year over year basis.
In an unprecedented move, the Federal Reserve established a target range for the federal funds rate from zero to one-quarter percent Tuesday, bringing the target to its lowest level in over 50 years. The highly unusual move of establishing a target range comes as U.S. policymakers face the most severe economic crisis since the Great Depression.
Gold prices closed modestly higher on Tuesday and then surged in after hours trading on the rate cut. Before the decision was announced, February gold closed up $6.20 at $857.50 per ounce.
Meanwhile, crude oil inched lower on Wednesday as traders showed they don't feel a the anticipated production cut of 2 million barrels per day by OPEC will be enough to combat plunging demand. Light sweet crude fell 43 cents to $43.17 in early trading.
