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Gold Futures Catch a Bid

Bullion reaches its highest point since 1980 after the Fed rate cut.

Updated from 11:45 a.m. EDT

Gold prices rebounded and surged to their highest point since 1980 Tuesday after the

Federal Reserve

lowered the key overnight bank lending rate.

December-dated bullion contracts were up $9.60 at $733.30 an ounce in recent New York futures market action.

The exchange-traded funds that hold stores of the metal followed the futures upward. The

streetTrack Gold Shares

(GLD) - Get Free Report

and the

iShares Comex Gold Trust

(IAU) - Get Free Report

both rose around 0.9%.

Because the cut in the fed funds target rate, by 50 basis points, is viewed as having the potential to cause inflation, the dollar fell, and that contributed to the rally in gold. The price of gold tends to rise as the value of the U.S. currency decreases.

In others metals action, copper prices were adding 3 cents at $3.48 a pound, and silver prices were up 17 cents to nearly $13.10 an ounce.

Wheat prices were rallying 1.4% at $8.87 a bushel. Coffee was up 0.8% at $1.29 a pound.

Elsewhere, Wachovia downgraded agricultural chemicals producer


(FMC) - Get Free Report

to an underperform rating from market perform. Still, the shares were recently up 1%.