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Gold logs record close, a ninth consecutive session, then climbs after the Fed’s policy statement

Gold futures made a ninth consecutive win on Wednesday to set another record and went even higher after the Federal Open Market Committee reiterated plans to keep interest rates close to zero until the economy sees further improvement.

In its statement after two days of talks, the Fed noted that economic activity and jobs have “slightly increased in recent months,” once again pledging to use its full range of instruments to support further improvement.

“The Fed came as no surprise and basically told the market that in the future it would be common – or unusual,” said Brien Lundin, editor of Gold Newsletter. “With this one small element of uncertainty removed, gold reacted well and resumed its rally.”

Against this background, gold for delivery in August GC00,
+ 1.01%
GCQ20,
+ 1.01%
was $ 1,958.40 an ounce in electronic commerce shortly after the Fed statement. It posted a profit of $ 8.80, or nearly 0.5%, on Wednesday to set a record high of $ 1,953.40 an ounce on Comex ahead of Fed news.

Gold also ended Tuesday at a record $ 1,944.60 an ounce. The trajectory of the ninth session wins is the longest run since the climb of the 10 sessions ended in January.

The statement appeared on Wednesday at the press conference of Fed Chairman Jerome Powell. Investors did not expect major policy tweaks, but looked for Powell to maintain a restrained tone, indicating that the central bank is determined to keep monetary policy loose and is willing to do more if necessary to continue prevent downturn.

Read: The Fed will not be happy with how the economy is performing, but is not alarmed enough to take aggressive action

The central bank said on Wednesday that it will keep interest rates close to zero until employment recovers and inflation picks up.

“The recent spike in coronavirus cases has led to restrictions being re-imposed,” and the number of new unemployment claimants exceeds one million, said Sanjeeban Sarkar, editor-in-chief of The Economist Intelligence Unit.

“These factors bode well for the precious metal market,” and see gold prices going forward, he told MarketWatch. “Low interest rates stimulate gold purchases.” However, with the Fed’s hand at the moment, “the decision to leave rates unchanged is usually discounted.”

The US dollar extended the decline against currency rivals after the Fed statement, with the ICE US Dollar DXY,
-0.50%
a 0.4% decline in Wednesday trading, providing further support for dollar-denominated gold prices.

Meanwhile September silver SIU20,
+ 1.64%
added 2 cents, or 0.09%, for $ 24,321 an ounce. Prices, which fell to their highest level since April 2013 on Monday, have soared about 25% higher so far.

Silver is emerging “for many of the reasons gold is because it is both precious metals that are sought after in times of economic uncertainty and volatility in the financial markets,” said Jordan Eliseo, manager, listed products and investment research at The Perth Mint.

“Unlike gold, which is seen more as a monetary metal by the market, silver is also widely used in industry, which is one of the reasons why price movements (both up and down) can often be more volatile than the movements in gold itself, ”he told MarketWatch.

Looking ahead, “there are no guarantees that history will repeat itself, but a growing number of investors are positioning their portfolios to profit if silver outperforms gold in the coming years, as it has been for the past three months,” said Eliseo .

Among others metals traded on Comex Wednesday, September copper HGU20,
+ 0.56%
increased by 0.05% to $ 2,919 per pound. Platinum PLV20 from October,
-1.91%
lost 2.8% to $ 958.50 an ounce and September palladium PAU20,
-4.51%
fell 4.4% to $ 2,261.20 an ounce.

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