SAN FRANCISCO (MarketWatch) — Gold prices climbed to levels unseen since early December on Thursday, extending a rally triggered the previous day after the U.S. Federal Reserve pledged to hold interest rates near zero until the end of 2014.
Gold futures for February delivery GC2G +1.49% rose $28.50, or 1.6%, to trade at $1,727.40 on the Comex division of the New York Mercantile Exchange.
They earlier traded as high as $1,731.50 an ounce. Futures soared by more than $35 on Wednesday to break the $1,700 barrier on the heels of the Fed’s decision.
Prospects of inflationary pressures due to the low interest rates are supporting gold, George Gero, a vice president at RBC Wealth Management, said in e-mailed comments.
The Fed’s new commitment extends its previous statement that economic conditions were likely to keep rates in the historic low range of 0% to 0.25% until at least mid-2013.
And the central bank also appeared to leave the door open for a further round of quantitative easing if the economic recovery stalls.
The Fed decision was also credited with boosting oil and other commodities, lifting equities and undercutting the dollar.
“Although the Fed’s decision bolstered commodities prices across the board, the impact on precious-metals prices has been the most apparent,” wrote analysts at KBC Bank in Brussels.
“Generally, [a] low real-interest-rates environment has been historically favorable for the price of gold. Therefore, prolonged period of stable low interest rates (perhaps through late 2014) could play in favor of the price of the yellow metal in months ahead,” they said.
William L. Watts and Claudia Assis, MarketWatch January 26, 2012