Gold falls after Fed rate cut
March 19, 2008
NEW YORK (Mar 18) Gold futures plunged Tuesday, retreating from $1,000 territory despite an aggressive U.S. interest rate cut that boosted other commodities.
Other futures rose broadly, with crude oil, copper and agriculture futures all trading higher.
The Federal Reserve slashed a key interest rate by three-fourths of a percentage point in a bid to free up locked credit markets and kick-start the U.S. economy. The move lowered the federal funds rate to 2.25 percent, the lowest level since in more than three years. Still, many investors had predicted a full point cut.
Gold for April delivery rose $1.70 to settle at $1,004.30 on the New York Mercantile Exchange but pulled back nearly $25 after the Fed's decision. The metal fetched $978.20 an ounce in aftermarket trading, down $24.40.
Gold investors are "taking some money off the table," George Gero, vice president of RBC Capital Markets Global Futures in New York, said in a note. "But with the energy rally and weaker dollar, we have to assume setbacks in gold are still buying opportunities at the moment."
Though some analysts warn gold is due for a correction, others say it could still move higher first due to economic worries, record high crude prices and a tumbling dollar. Gold is traditionally viewed as safe-haven investment during times of economic uncertainty and rising inflation.
The dollar strengthened slightly after the Fed's move, further prompting investors to sell gold. The euro traded at $1.5640 in Tuesday afternoon trading, down from a record-high reached earlier in the day of $1.5831.
The greenback's decline versus the 15-nation euro has been a major driver of gold, which gained 31 percent last year and 18 percent so far this year. A falling dollar encourages buying of gold because the metal is known for holding its value. A weaker greenback also makes dollar-denominated commodities like gold cheaper for overseas buyers.
Other precious metals traded mixed Tuesday. Silver for May delivery fell 34 cents to settle at $19.96 an ounce on the Nymex, while May copper added 6.15 cents to settle at $3.7465 a pound.
Other futures rose broadly, with crude oil, copper and agriculture futures all trading higher.
The Federal Reserve slashed a key interest rate by three-fourths of a percentage point in a bid to free up locked credit markets and kick-start the U.S. economy. The move lowered the federal funds rate to 2.25 percent, the lowest level since in more than three years. Still, many investors had predicted a full point cut.
Gold for April delivery rose $1.70 to settle at $1,004.30 on the New York Mercantile Exchange but pulled back nearly $25 after the Fed's decision. The metal fetched $978.20 an ounce in aftermarket trading, down $24.40.
Gold investors are "taking some money off the table," George Gero, vice president of RBC Capital Markets Global Futures in New York, said in a note. "But with the energy rally and weaker dollar, we have to assume setbacks in gold are still buying opportunities at the moment."
Though some analysts warn gold is due for a correction, others say it could still move higher first due to economic worries, record high crude prices and a tumbling dollar. Gold is traditionally viewed as safe-haven investment during times of economic uncertainty and rising inflation.
The dollar strengthened slightly after the Fed's move, further prompting investors to sell gold. The euro traded at $1.5640 in Tuesday afternoon trading, down from a record-high reached earlier in the day of $1.5831.
The greenback's decline versus the 15-nation euro has been a major driver of gold, which gained 31 percent last year and 18 percent so far this year. A falling dollar encourages buying of gold because the metal is known for holding its value. A weaker greenback also makes dollar-denominated commodities like gold cheaper for overseas buyers.
Other precious metals traded mixed Tuesday. Silver for May delivery fell 34 cents to settle at $19.96 an ounce on the Nymex, while May copper added 6.15 cents to settle at $3.7465 a pound.
Labels: Markets
