Gold rallies to new record

Gold rose to a record high above $1,520 an ounce on Wednesday after the Federal Reserve announcement that it would keep US interest rates very low. It was the eighth record high in nine trading sessions for spot gold. The precious metal rose more than 1 percent to touch $1,523.44 an ounce after the Fed said it would end its $600 billion bond buying stimulus program in June as planned.
The Fed also said it was in no rush to raise short-term interest rates that have remained near zero to support the US economy. James Steel, metals analyst and Senior Vice President at HSBC in New York said the Fed''s post-meeting statement had "put the nail in the coffin" of the idea that the Fed was preparing to tighten monetary policy faster than previously thought.
"There will be no speed about reversing policy. Their accommodative policy has been ascribed in part to concerns about higher inflation and also have pumped up commodity demand abroad," Steel said. "Both of those things are good for gold." Spot gold was last up 1.3 percent at $1,521.35 an ounce by 2:20 pm EDT (1705 GMT), easing slightly from the earlier record. US futures for June delivery were last up 1.2 percent at $1,521.30, having also touched a record of $1,524.20 an ounce.
Fed Chairman Ben Bernanke started the central bank''s first post-decision news conference at 2:15 pm EDT, which traders and analysts were watching for further clues on the outlook for monetary policy in the world''s largest economy. The Fed Chairman said he expected a relatively weak number for US GDP in the first quarter, and it would be at least two more meetings before the Fed considered raising rates.
Credit Suisse analyst Tom Kendall said the weak dollar and other drivers for the gold price remained in place. "It is the dollar, it is sovereign debt, whether that is the US or the periphery of Europe. It is headline rates of inflation in emerging markets and developed markets and it is a bit of geopolitical uncertainty."
Silver hit a 33-year peak on Monday, then tumbled as much as 4.9 percent in the next session, its largest one-day fall in a month. It remains on track for a 21-percent gain this month and a 47-percent rise this year, which would make it the top performing precious metal and commodity of 2011. Silver "is definitely in a period of consolidation and I think it would be healthy for the market to trade broadly sideways for at least a few days," said Kendall.
Spot silver was up 3.19 percent at $47.00 an ounce, while US silver was last up 4.2 percent at $46.93 Implied volatility in silver options has been at its highest this week since November last year as the spot price has swung from lows around $43 to highs above $49 in the space of a week.
"The recent sharp increase in volatility is an indication of the increasing nervousness of market players and could be a sign that the rally in the silver price is approaching an end," said Commerzbank in a note. Platinum was last up 1.3 percent at $1,822.50 an ounce, while palladium was up 1.4 percent at $763.25.