Exchange traded funds tracking gold miners surged Wednesday on heavy trading volume after the Federal Reserve announced its commitment to maintaining low interest rates until late 2014 and the prospect of higher inflation.
Gold prices sank to around $1,650 earlier in the day ahead of the Federal Open Market Committee meeting on speculation that the FOMC wouldn’t deliver on new easing measures, according to the International Business Times. [Gold ETFs Battle Technical Resistance; All Eyes on Fed Decision]
However, after the Fed announced it will maintain low interest rates until at least late 2014, gold prices quickly reversed. Gold futures were up 2.% at last check Wednesday, trading just above $1,700 an ounce. [Measuring the Impact of Gold ETFs]
“That’s really really dovish and you are seeing a lot of people running into gold,” Phil Streible, senior commodities broker at RJO Futures, said in a TheStreet article. “Inflation will be created … [the Fed is]artificially creating inflation for the next couple of years.”
“The Fed telling us no rate increase to at least 2014 is a sharp rally promoter for gold,” George Gero, senior vice president at RBC Capital Markets, said, “as low interest rates to continue will make gold a good alternative hold and not expensive to maintain.”
Gold miners also gained along with broader equity moves after the Fed’s announcement.