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Gold challenges 28-year peak Posted: Wed, 19 Sep 2007 [miningmx.com] -- GOLD rallied to a 16-month high while US gold futures surged to a 28-year peak in New York's electronic trade Tuesday (18 September) after the Federal Reserve slashed the benchmark interest rate by a half-percentage point in a bid to boost the economy. "Obviously this was a very substantial, aggressive move. I think it's bullish for gold. I think it has potential inflationary implications," said Bill O'Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey. Spot gold rose as high as $721.50 an ounce, and was last quoted at $719.30/780.30 by 4.12 pm (20:12 GMT), against $716.80/717.60 late in New York on Monday. It is currently trading at $724 at 8am CET (7.00 GMT). At 4.19 p.m. EDT (2019 GMT), on the Globex electronic platform used by the New York Mercantile Exchange and its COMEX metals division, the December gold contract was up $7.70 or 1.1% at $731.50 an ounce. The contract rallied to a high of $735.50, the loftiest level since gold was trading above $800 in January 1980. Gains accelerated when the benchmark contract exceeded the May 2006 high of $732. George Gero, vice president of RBC Capital Markets Global Futures in New York, said that bullion traders had not expected the half-percentage-point cut and they reacted by heavily buying electronic gold futures. Meanwhile, a big open interest in COMEX gold futures and futures options could imply much higher price volatility in the near-term, Gero said. Gero said that gold's price could move to a new, higher trading range, but he also cautioned about profit taking in the short term. Gold, on a spot basis, is not far from its 28-year high of $730 an ounce struck in May last year and is roughly $138 below its all-time high of $850, fixed in London on January 21, 1980. Stocks rally In a unanimous decision, the Fed took the overnight federal funds rate down to 4.75%, its lowest level since May of last year. The Fed also lowered the discount rate it charges for direct loans to banks by a half-point to 5.25%. "Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time," the Fed said in a statement outlining its decision. After the Fed announcement, US stocks rallied almost 3%, while the dollar dropped 50 basis points and set a new record low against the euro. US crude also jumped to a new record high in electronic trading. Click Here to subscribe to our daily newsletter
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