Gold surged the most since March 2009 and silver rose to a 30-year high after the Federal Reserve said it will buy more debt, driving the dollar lower and boosting demand for precious metals as alternative investments. The dollar fell to the lowest level in almost nine months against a basket of major currencies. The Fed yesterday said it will buy an additional $600 billion of Treasuries through June to spur growth. Before today, gold futures gained 22 percent this year, reaching a record $1,388.10 an ounce on Oct. 14.
“The Fed aims to weaken the dollar and create inflation,” said Peter Schiff, the president of Euro Pacific Capital in Westport, Connecticut. “Gold and non-dollar investments should benefit from their efforts.”
Gold futures for December delivery rose $40.30, or 3 percent, to $1,377.90 an ounce at 12:02 p.m. on the Comex in New York. A close at that price would mark the biggest gain for a most-active contract since March 19, 2009.
The Federal Open Market Committee said yesterday that it was compelled to act because “progress” toward objectives of full employment and stable prices “has been disappointingly slow.” The U.S. and other governments kept interest rates low and spent trillions of dollars to revive the global economy.
‘Inflationary Threat’
“Investors are starting to think about the long-term inflationary threat,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “The $600 billion in bond purchases looks very friendly for buying anything tangible like gold. Commodities are going to look undervalued.”
The Thomson Reuters/Jefferies CRB Index of 19 raw materials rose to a two-year high.
“Commodity prices are far more likely to rise than to fall,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. The Fed has signaled that “it will do what it must to assure that deflationary pressures are dealt a death blow, that inflation is the better choice.”
Inflation expectations, based on the 10-year U.S. Treasury breakeven rate, have fallen to 2.17 percent from 2.4 percent at the beginning of the year. Gold is traditionally a hedge against accelerating consumer prices.
Silver futures for December delivery jumped $1.154, or 4.7 percent, to $25.59 an ounce. Earlier, the price reached $25.72, the highest level since March 1980.
Palladium futures for December delivery climbed $26.50, or 4.1 percent, to $669.20 an ounce on the New York Mercantile Exchange. Earlier, the price touched $676.85, the highest level since May 2001.
Platinum futures for January delivery rose $52.10, or 3.1 percent, to $1,749.30 an ounce.
