Gold Rallies on Rate Cut
September 18th, 2007😉
Via: Bloomberg:
Gold futures rose to a 27-year high after the Federal Reserve cut interest rates, sending the dollar to a record low against the euro and boosting the appeal of the precious metal as a currency hedge.
The Fed lowered its benchmark rate by 0.5 percentage point, more than economists forecast, to 4.75 percent, the first cut in four years. Five of the past six bear markets for the U.S. currency have sparked a rally in gold.
“Investors are scared,” said Ron Goodis, futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. “The rate cut is inflationary, and money is flowing into gold as a hedge.”
Gold futures for December delivery jumped $11.70, or 1.6 percent, to $735.50 an ounce at 3:26 p.m. in electronic trading on the Comex division of the New York Mercantile Exchange. That marked the highest price for the most-active contract since Feb. 11, 1980.
“Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets,” the Federal Open Market Committee said in a statement after meeting today in Washington.
The reduction in borrowing costs was the first since 2003. Before today’s meeting, the Fed kept rates unchanged since June 2006.
