US gold futures accelerated gains to finish higher on Wednesday as crude oil thundered to a fresh record peak and the dollar slumped to all-time lows against major currencies. After the end of the pit session, the US Federal Reserve slashed the benchmark federal funds rate by a quarter-percentage point to 4.5 percent.
December gold briefly breached $800 an ounce in afternoon electronic trading on the dollar weakness. "Needless to say, the drop in the oil inventory has sparked off the oil price, and that has also sparked off the gold and silver markets," said Andy Montana, a director at bullion dealer ScotiaMocatta in Toronto.
Most-active December gold on the Comex division of the New York Mercantile Exchange was up $7.50, or 1 percent, at $795.30 an ounce, trading between $780 and $796.70.
Oil surged more than $4 to a record over $94 a barrel on Wednesday after a steep drop in US inventories fuelled winter supplies concerns. Investors as a hedge against inflation use gold, while a lower dollar makes gold, which is denominated in the greenback, cheaper for holders of other currencies.
The dollar initially jumped after a robust US productivity report but fell back to record lows against major currencies after the Fed cut key interest rates. After the end of Wednesday's open-outcry trading, the Fed cut US interest rates, but said the risk of inflation was roughly equal to downside risks to growth, suggesting further rate reductions are far from a sure bet.
"Recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation," the Fed said. "In this context, the committee judges that some inflation risks remain."
Bill O'Neill, partner at LOGIC Advisors in Upper Saddle Valley, New Jersey, said the Fed.'s move should not prevent gold from continuing to rise higher. "Certainly gold has fully discounted this. It's not really a plus to the market. I think the dollar will continue to go lower, and the oil market still continues to be a very serious inflationary threat down the line," O'Neill said.
"The only possible negative is that it may well signal that the Fed.'s next move will be a pause," he said. In mining news, Harmony Gold said a closure of one of its biggest mines after an accident in October would hit second-quarter output and results, and the quarter would also see higher unit costs.
South Africa's Gold Fields said on Wednesday it had ceased blasting at its No 4 shaft at its Aloof mine for the rest of the day after two workers were killed in an accident. In Africa, Barrack Gold Corp said on Tuesday that production at its Bulyanhulu gold mine in Tanzania has been halted due to what it termed an "illegal" strike, and that it has fired about half of the mine's work force.
Newmont, the world's second-largest gold producer, third quarter profit doubled, boosted in part by the soaring price of gold. Spot bullion closed at $791.70/792.50, compared with the on Tuesday New York close at $781.25/781.85. London bullion dealers fixed the afternoon spot reference price at $789.50. Mexico's Penalise, the world's top producer of refined silver, sees prices for the precious metal falling in the medium-term as the global economy slows, Chairman Alberto Bailers said on Tuesday. Comex December silver closed up 11.0 cents at $14.438 an ounce, trading between $14.180 and $14.550.
Spot silver was quoted at $14.42/14.47, higher than on Tuesday's late New York quote of $14.18/14.22. London silver was fixed at $14.32. Nymex January platinum climbed $6.70 to end at $1,447.60 an ounce. Spot platinum was quoted at $1,441/1,445. December palladium finished up $2.45 at $374.25 an ounce. Spot palladium fetched $369/373.
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