By Sarah Turner and Barbara Kollmeyer, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures inched higher Friday, extending gains a day after settling at their highest in nearly seven months as investors cheered the Federal Reserve’s latest bond-purchase plan.
Gold for December delivery GCZ2 -0.06% rose $3.30, or 0.2%, to $1,775.50 an ounce on the Comex division of the New York Mercantile Exchange on Friday.
The benchmark gold contract surged $38.40 in regular trading in New York on Thursday, settling at $1.772.10 an ounce, its highest close since late February.
On the week, gold has gained more than 5%.
Gold’s breakout started to take shape as traders staked out positions in hopes for the Fed’s stimulus announcement, news that could both weaken the U.S. dollar and stoke inflation expectations.
Gold is viewed as a safe store of value and also benefits from fears of currency debasement.
The Fed said Thursday that it would buy $40 billion of mortgage-backed securities each month until it starts to see the labor market pick up. The U.S. central bank also extended an existing program in which it buys long-dated securities and sells short-dated ones, and extended guidance for ultralow interest rates out to 2015.
The Fed’s commitment to open-ended asset purchases was particularly supportive for gold, metal-sector analysts said.
“The Fed does not have a defined upside limit to securities purchases, except to say that these will continue until the outlook for the labor market improves. If unemployment stays high, this means asset purchases will continue automatically,” said HSBC strategists.
“In addition to providing support to the financial markets and economy, these actions are buoying gold prices,” the strategists said.
The dollar extended losses on Friday, providing an extra boost to gold. The ICE dollar index DXY -0.68% , which compares the U.S. unit to a basket of six currencies, stood lately at 78.722, down from 79.254 late Thursday.
Uncertainty about the path of U.S. fiscal policy, along with rising geopolitical tensions in the Middle East following attacks on U.S. embassies and consulates, served to boost demand for gold as well, the analysts at HSBC said.
Also Friday, copper for December delivery HGZ2 +3.13% rose 12 cents, or 3.3%, to $3.83 a pound.
Silver futures for December delivery SIZ2 -0.81% SIZ2 -0.81% traded lower, however, down 15 cents, or 0.4%, to $34.63 an ounce. “This market is thin, compared to gold, and could be more vulnerable to a price correction,” said the HSBC strategists.
Amid concerns about ongoing labor strikes in South Africa, platinum for October delivery PLV2 +1.36% jumped $26.50, or 1.6%, to $1,706 an ounce. December palladium PAZ2 +1.05% also rose, up $11.70, or 1.7%, to $701 an ounce.
Sarah Turner is MarketWatch's bureau chief in Sydney.
Barbara Kollmeyer is an editor for MarketWatch in Madrid.
