Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold surged from a 0.1% loss at closing to gains of more than 4%, rising to $1,364 in electronic trading, after the Federal Reserve stunned financial markets by deciding not to reduce quantitative easing. Citing weakness in the economy because of rising mortgage rates, high unemployment, and government spending cuts, the Fed announced it will continue buying $85 billion in bonds each month, perhaps until the end of the year, rather than scaling back as expected. Tantamount to printing money, QE supports higher gold prices by devaluing the dollar and increasing the risk of long-term inflation.

For weeks, analysts and traders were anticipating a taper of quantitative easing to be announced at the FOMC's September meeting, which ended today. Financial markets had already priced it in, pushing equities, commodities and precious metals lower while the dollar and bond yields have been rising. All those trends reversed direction today. The dollar fell sharply and Treasury yields tumbled on the news while commodities and equities rallied strongly, with the Dow and S&P 500 reaching new record highs. Silver reversed a 1% loss today to gain 6%, climbing to $23.21. Platinum closed up 0.2% before jumping another 2.5% to $1,461. Palladium shifted from losing 0.5% to gaining 2%, rising to above $720 after hours.

At the Comex close before the Fed statement: December gold lost down $1.80 to $1,307.60; December silver fell 22 cents to $21.56; October platinum added $2.80 to $1,425.20; and palladium dropped $3.85 to $703.10 an ounce.