Gold Ends Sharply Higher On Fed's Stimulus Move

(RTTNews) - Gold futures surged to end sharply higher Wednesday, mostly after a surprising U.S. Federal Reserve decision against scaling down its monetary stimulus of $85 billion monthly bond-buying program yesterday. Any quantitative easing is a positive for gold, which thrives on fears of inflation and currency debasement. This is gold's biggest daily gain since March 2009.

Investors largely ignored a slew of upbeat macroeconomic data out of the U.S., indicative of a positive direction for the economy.

A positive reaction to the Federal Reserve's highly anticipated monetary policy statement contributed to the jump in prices, after the central bank decided against scaling back its stimulus program. The Fed revealed it would continue to buy $85 billion bonds per month, and seek more evidence that economic progress will be sustained before adjusting the pace of its purchases.

Gold for December delivery, the most actively traded contract, soared $61.70 or 4.7 percent to close at $1,369.30 an ounce Thursday on the Comex division of the New York Mercantile Exchange.

Gold for December delivery scaled an intraday high of $1,375.40 and a low of $1,358.50 an ounce.

Yesterday, gold ended slightly lower, closing just before the Federal Reserve policy statement, even as investors anticipated the Fed to scale down its monthly $85 billion bond-buying program.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged at 911.12 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 80.39 on Thursday, up from 80.27 late Wednesday in North American trade. The dollar scaled a high of 80.45 intraday and a low of 80.07.

The euro traded slightly higher against the dollar at $1.3528 on Thursday, as compared to its previous close of $1.3522 late Wednesday in North America. The euro scaled a high of $1.3570 intraday and a low of $1.3502.

In economic news, a National Association of Realtors report on Thursday showed existing home sales in the U.S. unexpectedly climbed to their highest level in over six years in August. NAR said existing home sales rose 1.7 percent to an annual rate of 5.48 million in August after jumping 6.5 percent to a rate of 5.39 million in July. Economists expected existing home sales to dip to 5.25 million. This is the highest annual rate since February of 2007, when it touched 5.79 million.

The U.S. Labor Department on Thursday said claims for unemployment benefits rebounded less than expected in the week ended September 14. Initial jobless claims rose to 309,000, an increase of 15,000 from the previous week's revised figure of 294,000. Economists expected claims at 341,000.

The previous week's revised figure still reflects a seven-year low for jobless claims, although the data continues to be impacted by technical issues in two states. The Labor Department indicated the data for the latest week was also impacted by computer system upgrades, as the two states were still processing a backlog of claims.

A Federal Reserve Bank of Philadelphia report on Thursday showed manufacturing activity in the mid-Atlantic region picked up in September, with the index of regional manufacturing activity jumping to its highest level in over two years. The Philly Fed's diffusion index of current activity surged to 22.3 in September from 9.3 in August, with a positive reading indicating an increase in manufacturing activity. Economists expected the index to edge up to a reading of 10.0. The increase indicates the Philly Fed Index reached its highest level since hitting 36.1 in March 2011.

Meanwhile, a Conference Board report showed its index of leading U.S. economic indicators rose slightly more than expected in August. The Conference Board's leading economic index rose by 0.7 percent in August following a revised 0.5 percent increase in July. Economists expected the index to increase by 0.6 percent, in line with the growth originally reported for the previous month.

From Europe, U.K. retail sales declined for the first time in four months in August, reflecting weak demand for food. Retail sales volume, including automotive fuel, dropped unexpectedly by 0.9 percent month-on-month in August due to a fall in food sales, a report from the Office for National Statistics showed. Retail sales dropped for the first time in four months and by the most since last October in August. Economists expected sales to rise by 0.4 percent after the 1.1 percent increase in July.