Los Angeles – Gold bullion prices rose to $1,299.95 an ounce on Friday as silver hit a three decade high of $21.40 an ounce.
December silver is up 10.1 percent for the month and closed the week with a 2.8 percent rise, settling at $21.399. Gold, meanwhile, is up 3.8 percent this month and gained 1.6 percent this week, settling at $1,298.10.
The week began and ended with gold and silver prices setting new highs. The market had been focused on the Fed's policy meeting which concluded on Tuesday.
Gold is up against most currencies this month, but more so against the dollar. The dollar dropped sharply and was down 1.10 percent at 80.443 against a basket of major currencies following the Fed's policy announcement on Tuesday.
At the August FOMC meeting, Fed Chairman Bernanke announced the Fed’s plan to reinvest the proceeds of agency debt and mortgage backed securities into U.S. Treasuries expanding the quantitative easing program that was first instituted in March 2009.
That decision had helped fuel the advance in Gold bullion prices over the previous six weeks. The Fed said in its prepared statement following the latest FOMC meeting that, “The committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.”
The Fed went on to repeat its familiar promise to keep the benchmark lending rate in a range of zero to 0.25 percent “for an extended period.”
Gold's rally came on the prospect of further Fed action to prevent consumer prices from falling. The market interpreted this to be yet another sign that the Fed would rather err on the side of more inflation rather than the dreaded deflation.
Predictably, fears of the Fed creating higher inflation rose across the board. The Fed's assertion that it will return inflation to mandated levels prompted investors to buy gold bullion as a hedge against both inflation and economic uncertainty.
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