Gold for June delivery settled up $19.50 to $1,452.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,455.50, a record, and as low as $1,431 during Tuesday's session, while the spot gold price was rising more than $18, according to Kitco's gold index. Gold was moving higher in after-hours trading on the release of the minutes from the Federal Open Market Committee's last meeting on March 15.
Gold shattered its $1,450 resistance area Tuesday. If the metal extends its rally Wednesday then momentum traders could get more heavily invested as gold's surge would be deemed "real."
"If you didn't buy today," says Scott Redler, chief strategic officer for T3Live.com, "you can get into a tier one [lightly invested] because we should have continuation."Silver prices closed up 68 cents at $39.18 an ounce. Gold and silver soared after data found economic activity in the U.S. services sector slowed in March. The Institute for Supply Management's non-manufacturing report fell to a reading of 57.3 from 59.7 in February. The dip was larger than expected. The U.S. dollar slipped slightly, giving gold and silver prices a bounce. Technical trading also helped as buy orders were triggered that forced traders to buy at previously appointed levels. The headline back-drop is also fueling the rush into gold and silver. The U.S. government is struggling to agree on a 2011 budget and the words "government shutdown" are being thrown around. Conflict is still raging in the Middle East and Portugal seems to be on its last fiscal leg. Gold and silver received further support in after-hours trading after the release of the Fed's minutes from its last meeting where members said there was no need to alter or curb quantitative easing round two. The Fed said consumer and business spending and unemployment were slowly recovering while housing remained depressed. The central bank acknowledged that near-term inflation is rising, spurred on by turmoil in Japan and the Middle East, but stood behind its assertion that long term prices were stable. Members also stated that the Fed would alter its accommodative monetary policy, i.e. raise rates, but when is the big question. Time frames being floated were end of 2011 or 2012. The minutes echoed comments from Federal Reserve Chairman Ben Bernanke in a speech Monday where he said that inflation is only in commodities and will be "transitory," but that the Fed is monitoring prices "extremely" closely and is ready to act if need be. His description, at first, was a mixed bag -- inflation should help gold and silver prices, but the threat of a rate hike should temper their upswing. The dreaded rate hike is that thorn for gold and silver. Earlier in trading, precious metals had been losing steam as China's central bank raised key interest rates by 25 basis points taking the deposit rate to 3.25%. With inflation at 4.9%, real interest rates are still at a negative 1.65%. As money is worth less in banks, precious metals will continue to make an attractive alternative. "You get a knee-jerk reaction," says Anthony Neglia of Tower Trading, "[silver] might trade down ... and then the fear of inflation ... is going to bring those buyers back into silver." Silver could be subject to this same kind of trading on Thursday when the European Central Bank is expected to raise rates.
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