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Gold Rebounds on U.S. Fed Decision to Flood System With Dollars

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Feiwen Rong
Bloomberg
Tuesday, Oct 14, 2008

Gold climbed for the first time in three days as the U.S. decision to flood the financial system with unlimited dollars fueled concern inflation may rise, boosting the precious metal’s appeal as an alternative asset.

The Federal Reserve yesterday led an unprecedented push by central banks to inject the financial system with as many dollars as banks want, backing up government efforts to revive confidence and helping to reduce money-market rates. World stocks rallied after about $28 trillion in value was erased from the world’s stock markets this year. Commodities gained.

“People aren’t sure whether the pumping of all this cash is inflationary, and also the continuing uncertainty about other markets,” Charles Dowsett, head of structuring and trading of precious metals at ABN Amro Holding NV in Sydney, said by phone.

(Article continues below)

Bullion for immediate delivery jumped as much as $18.67, or 2.2 percent, to $851.72 an ounce before trading at $850.67 at 9:51 a.m. in Singapore. Silver for immediate delivery jumped 3.5 percent to $11.08 an ounce.

Asian stocks surged, extending a global rally after the U.S. and European governments agreed to buy stakes in banks to unlock credit markets. Japan’s Nikkei 225 Stock Average today soared 12.5 percent. U.S. stocks staged the largest rally yesterday in seven decades.

  • A d v e r t i s e m e n t

December-delivery gold gained 1.1 percent to $851.50 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

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This article was posted: Tuesday, October 14, 2008 at 3:49 am





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