MW: Gold rallies as dollar sinks on Fed policy outlook
By Barbara Kollmeyer and Carla Mozee, MarketWatch
MADRID (MarketWatch) — Gold futures rallied on Thursday after Federal Reserve Chairman Ben Bernanke said U.S. interest rates will remain low to aid economic growth.
Gold for August delivery GCQ3 +2.97% climbed $39, or over 3%, to $1,286.90 an ounce in electronic trade. Gold held onto those gains after data showing that weekly jobless claims jumped 16,000 to a seasonally-adjusted 360,000, the highest level in two months.
U.S. stock futures soared along with gold.
At an appearance in Boston late Wednesday, Bernanke indicated that the U.S. central bank wouldn’t rush to raise interest rates, even after the unemployment rate reaches the Fed’s target of 6.5%.
Ahead of his remarks, minutes from the Fed’s meeting in June showed that half of the policy-setting board’s members backed paring bond purchases by the end of this year. On the other hand, “many” other members said it’s likely asset purchases would be needed into 2014.
The signal that the Fed will likely maintain an accommodative policy boosted gold prices, as quantitative easing has been seen as supporting the rally in gold in recent years.
“We presume that the strong reaction of the precious-metal markets is also related to the fact that investors believe that the Fed’s actions and attitude do not differ significantly from those” of the European Central Bank or Bank of Japan, said Carsten Fritsch and other analysts at Commerzbank in a note. “This is likely to prompt investors to increasingly seek a ‘safe haven’ and a currency that is independent of the central banks, thus again luring in buyers of gold.”
The analysts added that the massive slump that gold has seen since April seems to have helped correct the market, with “most speculative investors having already pulled out of gold.”
Gold has had a rough year, in part on expectations that the Fed will start to taper bond purchases. The precious metal dropped 23% in value in the second quarter and is down nearly 26% on a year-to-date basis.
The Fed’s message hit the U.S. dollar DXY +0.13% . A weaker greenback benefits dollar-denominated commodities such as gold as it makes them less expensive for holders of other currencies.
Ahead of the Fed minutes Wednesday, August gold closed up $1.50, or 0.1%, to settle at $1,247.40 an ounce.
Thursday’s move in gold put prices on track for a fourth consecutive day of gains.
On Thursday, silver for September delivery SIU3 +4.57% jumped 76 cents, or close to 4%, to $20.06 an ounce, and September copper HGU3 +3.32% rose 9 cents, or 3%, to $3.18 a pound.
Platinum for October delivery PLV3 +2.51% jumped $35.50, or 2.6%, to $1,403.60 an ounce, and September palladium PAU3 +1.43% notched a rise of $9.30, or 1.3%, to $723.10 an ounce.
Precious-metal-related stocks and exchange-traded funds were also benefiting from the precious metal’s rally. Direxion Daily Gold Miners Bull 3x Shares ETF NUGT +14.98% jumped 15% in premarket trading and Velocity Shares 3x Long Silver ETN USLV +14.18% jumped 12%. ProShares Ultra Silver ETF AGQ +9.90% jumped over 8%.
Europe’s miners were also soaring. Rio Tinto PLC RIO +6.54% UK:RIO +5.41% gained 5%, and Anglo American PLC UK:AAL +4.65% and BHP Billiton PLC BHP +4.67% UK:BLT +4.44% gained over 4% each.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @MWBarbaraKollmeyer.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
