The outcome of this week’s policy meeting of the Federal Reserve boosted demand for gold, helping the yellow metal to a weekly gain of US$70 per ounce.
Following the conclusion of the meeting late on Wednesday, the Federal Open Market Committee (FOMC) announced a decision to keep interest rates at near zero through 2014. The central bank had previously indicated that rates would stay low until mid-2013.
The Fed’s loose monetary policy is aimed at driving growth in consumer prices to encourage spending.
The move reduced demand for the US dollar, which is seen as an alternative asset to gold, while boosting the yellow metals’ appeal as an inflation hedge.
The decision to keep interest rates at low levels for longer than planned came as a surprise as as it followed a marked improvement in the US job market.
The latest monthly non-farm payrolls report from the Department of Labor showed that the US economy created 200,000 new jobs in December, while jobless claims fell to near four year lows last week.
However, Fed chairman Ben Bernanke said at a press conference that followed the FOMC meeting that the economic recovery in the US was yet to enter a “new, stronger phase”, while the euro zone debt crisis remained a major concern.
Bernanke also indicated that the central bank was open to the idea of introducing further stimulus measures to support the economic recovery.
Gold ended the week at US$1,737/oz. Other precious metals were headed in the same direction this week. Silver advanced from US$32.20/oz to US$33.99/oz and platinum climbed from US$1,531/oz to US$1,619/oz.
Shares in major precious metals miners were in demand this week.
Gold producer Randgold Resources (LON:RRS) rose from 7,055 pence to 7,260 pence over the past five days of trading. Fellow FTSE 100 constituent, silver miner Fresnillo (LON:FRES), climbed from 1,725 pence to 1,801 pence.
In the FTSE 250, platinum miner Lonmin (LON:LMI) surged from 1,032 pence to 1,092 pence and gold producer African Barrick Gold (LON:ABG) advanced from 469.5 pence to 515.5 pence.