Gold News & Info

Source: Bill Musgrave, American Gold Exchange

Austin— Gold surged 1.5%, closing at a two-week high of $1,169, in response to yesterday's statement from the Federal Reserve dimming the outlook for a rate hike by midyear.

Following its two-day meeting this week, the Fed signaled its intention to raise interest rates more slowly than previously thought, keeping monetary policy looser for longer. The shift toward accommodation came in response to slower growth, falling inflation, weakening exports, and a stronger dollar.

While the new statement removed previous assurance of "patience" before the first rate increase, Fed Chair Janet Yellen emphasized that this change suggests no impatience on the part of the FOMC. Rather, the Fed said it needs to be "reasonably confident" that inflation will move back toward its 2% target. The current trend is in the opposite direction, with the Fed's inflation forecast falling to 1.4% from 1.8% in the December statement.

Chicago Fed President Charles Evans said today that the biggest risk is raising rates too soon because it could deliver an adverse shock to the economy. According to the CME Group's FedWatch calculator, the market now expects the first rate hike in October, much later that the June hike previously anticipated.

Gold was further supported by more soft economic data. Manufacturing in the Philadelphia Fed region fell last month, following this week's reported downturn in the New York region, and U.S. jobless claims edged up last week. The metal held yesterday's after-hour gains despite today's 1.5% rebound in the dollar, which would typically weigh on gold by making it more expensive to foreign buyers.

Research by ANZ, the Australia and New Zealand Banking Group, forecast gold prices doubling in the next five to ten years because of exploding demand in China and other Asian nations.

The other precious metals were also higher, with silver jumping 3.7% while platinum and palladium rose 2.5% and 0.2%, respectively.

At the Comex close: April delivery gold surged $17.70 to $1,169; May silver jumped 57 cents to $16.11; April platinum gained $27 to $1,119.60; and June palladium added $1.15, to $765.80 an ounce.