Gold Advances for First Time in Three Days on Fed Outlook

Gold prices rose for the first time in three days after the Federal Reserve said interest rates will remain low, boosting demand for the precious metal as an alternative asset.

Fed policy makers today trimmed bond-buying by $10 billion for a fifth straight meeting, to $35 billion, keeping it on pace to end the program late this year. The central bank said that it expects rates to stay low for a “considerable time” after the bond buying ends.

Gold climbed 70 percent from December 2008 to June 2011 as the Fed bought debt and held borrowing costs near zero percent. Last year, the metal fell 28 percent as some investors lost faith in the metal as a store of value amid an equity rally and muted inflation.

“The Fed has made it clear that it will keep rates low for now,” Charlie Bilello, director of research who helps oversee $220 million of assets at New York-based Pension Partners LLC, said in a telephone interview. “The announcement of the stimulus amount being lowered to $35 billion was a confirmation of what people were expecting.”

Gold for immediate delivery rose 0.6 percent to $1,277.71 an ounce at 4:59 p.m. New York time. The price, down 0.5 percent in the previous two days, has climbed 6.4 percent this year.

On the Comex in New York, futures for August delivery settled 0.1 percent higher at $1,272.70, before the Fed announcement.

The metal’s 60-day historical volatility today reached the lowest since Oct. 18, 2010, according to data compiled by Bloomberg. Gold futures traded in a range of $45 this month, compared with $74 in May.

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editors responsible for this story: Millie Munshi at mmunshi@bloomberg.net Patrick McKiernan, Joe Richter

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