Daily Gold Update

Source: Dr. Bill Musgrave, American Gold Exchange

Austin— Gold jumped 4.7% to close just under $1,370, marking its biggest one-day gain since 2009, in response to yesterday's surprise decision by the Fed not to taper quantitative easing. In a move that stunned the financial markets, which had already priced-in a reduction in stimulus, the FOMC voted almost unanimously to maintain bond-buys at $85 billion per month, citing headwinds to the economy caused by rising mortgage rates, persistent unemployment, and the looming battle over the debt ceiling. Speaking to the press, Fed Chair Ben Bernanke would not commit to launching the taper later this year, saying the decision will be determined by economic data. He emphasized that interest rates will remain near zero until well into 2015.

The Fed's unprecedented program of monetary stimulus has supported much higher gold prices by devaluing the dollar and increasing the risk of long-term inflation, boosting demand for the metal as an alternative store of value. It has also driven equities to record highs by flooding the market with cheap liquidity, pushing down interest rates, and encouraging investors to undertake higher levels of risk.

Immediately after the Fed's Wednesday announcement, the dollar tumbled to a seven-month low, gold spiked higher in electronic trading, and equities rallied. Today, the dollar rebounded slightly and equities were mixed while gold and the other precious metals kept climbing. Silver ended with an 8% gain over yesterday's close, its best day since 2009; platinum finished 3.4% higher and palladium gained 5%.

At the Comex close: December gold jumped $61.70 to $1,369.30; December silver surged $1.73 to $23.29; October platinum gained $47.80 to $1,473; and December palladium rose by $35.10 to $738.20 an ounce.