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Gold Rises to One-Week High as Fed Expands Asset Buying

Gold futures rose to a one-week high after the Federal Reserve said it will buy $45 billion a month of Treasury securities starting in January, expanding its asset-purchase program to bolster the U.S. economy.

Borrowing costs will stay low “at least as long” as the unemployment rate remains above 6.5 percent and if inflation “between one and two years ahead” is projected to be no more than 2.5 percent, the Federal Open Market Committee said today at the conclusion of a two-day meeting. The dollar dropped for the third straight day against a basket of major currencies, boosting the appeal of gold as an alternative asset.

“This is going to continue to make the dollar fall and metals move higher,” Fain Shaffer, the president of Infinity Trading Corp. in Medford, Oregon, said in a telephone interview. “This is bullish for commodities across the board.”

Gold futures for February delivery rose 0.5 percent to settle at $1,717.90 an ounce at 1:42 p.m. on the Comex in New York. Earlier, the metal reached $1,725, the highest for a most-active contract since Nov. 30.

The price is headed for the 12th consecutive annual gain as central banks from the U.S. to China pledge more steps to spur economic growth.

Gold rose to a record $1,923.70 in September 2011. UBS AG said that the metal will top the all-time high next year.

“We don’t think gold has priced in a sizable expansion in the Fed’s balance sheet beyond current levels, but we do think that quantitative easing will again loom large in the first half of 2013,” Edel Tully, an analyst at UBS in London, said in a report before the central’s bank announcement.

Silver Gains

Silver futures for March delivery added 2.3 percent to $33.782 an ounce on the Comex, the biggest gain since Nov. 19.

On the New York Mercantile Exchange, platinum futures for January delivery climbed 0.4 percent to $1,646.40 an ounce. The metal has risen for six straight sessions, the longest string of gains since Oct. 4.

Palladium futures for March delivery increased 0.6 percent to $701.15 an ounce.

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