Source: Associated Press
San Francisco— Gold futures strengthened in after-hours trading Wednesday, but indexes for the metals sector closed lower after the Federal Reserve did the expected in raising U.S. interest rates.
The central bank's Federal Open Market Committee increased its target for overnight interest rates by a quarter of a percentage point, to 2 percent, and signaled that further rate hikes can be expected.
Following the news, gold for December delivery climbed as high as $435.40 an ounce in New York. The contract had closed out the regular session — ahead of the Fed decision — with a $1.70 loss at $434.50 an ounce.
Prices closed Tuesday at $436.20, marking gold's highest closing level since December 1988. The contract tallied up a total gain of $16.30 after rising in four of the last five regular sessions.
The Fed's decision "leaves the door open for speculation that the dollar can continue to decline and that is perceived as inflationary," said John Person, president of National Futures Advisory Service. "This may keep gold traders from selling aggressively" at Wednesday's closing price near $435, he said.
From here, gold may see some profit taking, but for the longer term, "investors will be lining up to buy dips," he said.
Eyeing the dollar
Earlier Wednesday, the dollar fell to a fresh record low against the euro following a government report showing a smaller U.S. trade deficit only encouraged a fresh round of buying of Europe's shared currency. However, the greenback gained some ground against the Japanese yen.
A strong euro and a strong hurricane season helped cut the U.S. trade deficit by 3.7 percent to $51.6 billion in September.
"While this morning's [U.S.] trade number was a little softer than expected, it still points to a worrisome deficit, which is but one of three key deficits (current account and budget) that the gold market receives support from," said Peter Grandich, editor of The Grandich Letter.
Looking ahead, John Stafford, editor of Strafford's Investment Strategy Letter, set out a short-term target range on gold at $450 to $500, "perhaps" setting the stage for a $1,000-an-ounce price by the early 2010s or sooner.
"The U.S. dollar is bound to lose at least 90 percent of its PPV (purchasing power value) by 2042," he said. "This is set in cement, and is as a result of deliberate [Fed] policies," he said. Many analysts expect gold prices to continue their climb, but they warned traders to be wary of a high degree of volatility along the way.
Elsewhere on the metals market Wednesday, the direction was lower.
December silver fell 11.5 cents to close at $7.42 an ounce on the New York Mercantile Exchange, and December copper shed 1.25 cents to end at $1.363 a pound. The January platinum contract closed down $1.30 to close at $848.90 an ounce, while December palladium closed at $215.05 an ounce, down 40 cents.
Tracking inventories, copper supplies were down 191 short tons at 43,352 short tons as of late Tuesday, according to Nymex. Silver stocks were down 591,940 troy ounces at 103.1 million, while gold inventories stood at 5.34 million troy ounces, down 3,087 from the previous session.
Share This Post
Choose Your Platform: Facebook Twitter Linkedin