COMEX gold and silver futures both advanced in early Wednesday business, as the dollar weakened following the Federal Reserve's late Tuesday decision to keep US interest rates steady, traders said.
"The dollar's weaker, based on yesterday's Fed news. And, that's it in a nutshell. Gold met with a little speculative buying. The initial reaction after the Fed's release was a little bit firmer," said James Quinn, commodity commentator for AG Edwards on the COMEX exchange floor.
December delivery gold rallied $8.0 to $665.30 an ounce at the New York Mercantile Exchange's COMEX division. It traded in a range between $646.30 to $666.50.
Prices added to gains later following a report that showed strong demand in the week ended August 4 led to a drop in US gasoline supplies and pushed oil prices higher.
Already strengthened by dollar weakness after the Federal Reserve's latest decision to keep US interest rates on hold, COMEX September silver shot up over 3 percent or 37.0 cents to a one-week high at $12.63 an ounce on the oil news. It set a range of $11.9850 to $12.63.
Spot silver raced up to $12.55/12.63 an ounce, from $12.23/28 previously. Tuesday's fix was at $12.13. Quinn said silver has also "put in a decent performance as it rides the coattails of copper, which as been strong because of the strike at the Escondida mine in Chile."
Noting that silver can sometimes be a by-product of copper, silver traders said they have been watching the labour strike in Chile, the world's largest producer, at Escondida the world's biggest copper mine.
Silver traders have taken their cue from copper prices, which have climbed as developments worsened at the mine.
"It's guilt by association," said one silver trader.
In addition, all precious metals began their rally overnight when the dollar fell following the Fed's decision.
The Federal Open Market Committee at its meeting on Tuesday decided to pause its two-year monetary tightening cycle.
Since June 2004, the Fed has raised the overnight interest rate from 1 percent to 5.25 percent, which lifted the dollar's yield advantage over other currencies. Spot gold charged up to $652.60/654.10 an ounce, versus Monday's late New York quote at $645.50/6.25. Wednesday's bullion fix in London reached $649.
NYMEX October platinum rose $5.0 to $1,261 an ounce. Spot platinum last fetched $1,242/1,248. September palladium gained $1.25 to $325.0 an ounce. Spot palladium hit $322/327.