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Potential fed rate cuts sends gold to new record { December 2008 } Original Source Link: (May no longer be active)
http://www.breitbart.com/article.php?id=D8U36JQO2&show_article=1http://www.breitbart.com/article.php?id=D8U36JQO2&show_article=1
Gold Hits Record After Bernanke Speech
Jan 10 01:52 PM US/Eastern
By JACKIE FARWELL
AP Business Writer
NEW YORK (AP) - Gold soared to a record high Thursday after Federal Reserve Chairman Ben Bernanke pledged to cut interest rates, undermining the dollar and boosting demand for the metal as a safe investment.
Other precious metals traded mixed, and agricultural futures fell.
Bernanke said the central bank was ready to act aggressively to prevent the economy, weakened by turmoil in the housing and credit markets, from sliding into a recession.
Some economists predict the Fed will slash its key interest rate by a half percentage point it meets Jan. 29-30. Others expect a more modest quarter percentage point cut, in light of high energy prices and inflation worries.
An ounce of gold for February delivery on the New York Mercantile Exchange jumped to $897.30, a fresh high, before easing back to $892.80, up $11.10.
The precious metal could hit the psychologically important $900 mark during the session, said Carlos Sanchez, a precious metals analyst with CPM Group in New York.
"I wouldn't be surprised to see a sell-off on profit-taking after prices hit that level," he said.
Silver for March delivery added 41 cents to $16.25 an ounce on the Nymex, while March copper fell less than a penny to $3.2735 a pound.
Gold has soared during the past year on its appeal as a hedge against inflation and as a safe investment in times of political and economic uncertainty. Gold breached its historic high of $875 an ounce, set in on Tuesday.
Still, the precious metal remains well below that level when adjusted for inflation. Gold would need to reach $2,115 to $2,200 an ounce to surpass its 1980 record.
The dollar fell following Bernanke's comments, feeding traders' appetite for gold. The euro rose to $1.4796 in afternoon trading.
Lower interest rates can weaken a currency and prompt investors to shift funds to hard assets. A cheap dollar can make commodities more attractive as an alternative investment, and can also raise demand from foreign buyers as their currencies gain strength.
The dollar had weakened earlier against the euro after European Central Bank President Jean-Claude Trichet said the bank is ready to act "pre-emptively" to counter inflation with future rate hikes. Both the ECB and the Bank of England voted to keep their benchmark interest rates unchanged.
Weighing on gold's rise was a sharp drop in oil futures on growing fears that a U.S. economic slowdown could dampen demand.
Light, sweet crude for February delivery fell $1.07 to $94.60 a barrel on the New York Mercantile Exchange, after dipping as low as $93.30 earlier.
Bernanke's speech followed an unimpressive jobless claims report and came one day after Goldman Sachs predicted a recession this year.
The Labor Department reported Thursday that 322,000 people filed applications for jobless benefits, down by 15,000 from the previous week. However, analysts said the decline reflected difficulties in adjusting the figures around the Christmas and New Year's holidays.
Agricultural futures traded lower Thursday on the Chicago Board of Trade.
Wheat for March delivery fell 3.5 cents to $8.86 a bushel, while March corn lost 1.25 cent to $4.76 a bushel. March oats dropped 2.5 cents to $3.25 a bushel and March soybeans lost 3.5 cents to $12.59 a bushel.
Copyright 2008 The Associated Press.
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