Precious-Metals Funds Soar on Fed Cut

With this week's 50-basis-point federal funds rate cut, the dollar plummeted and gold reached its highest level in 27 years. Thursday's close at $733 for the spot price of gold was second only to the Mount St. Helens-like price eruption to $873 an ounce back in the stagflation days of September 1980, coinciding with the start of the Iran-Iraq War.

Over the last 12 months, gold has followed the inverse path of the U.S. dollar, climbing more than 27% as the currency lost another 8% of its value against a basket of six major currencies.

Not only did the Fed's rate cut confirm the heightened risk of recession, it also made the U.S. dollar comparatively less attractive as a reserve currency.

Federal Reserve Chairman Alan Greenspan brought this home on his recent book tour to promote The Age of Turbulence, which explains the economic imprudence of following through on trillions of dollars in tax cuts from a projected surplus that didn't materialize. ...