(Recasts, updates with closing prices and market activity,
changes dateline to NEW YORK, previous LONDON)
By Frank Tang
NEW YORK, Jan 30 (Reuters) - Gold rose toward its record
high above $930 an ounce on Wednesday as the dollar tumbled
after the U.S. Federal Reserve aggressively slashed key
interest rates and left more room for further rate cuts to
boost the U.S. economy.
"This is certainly constructive. It weakens the dollar and
it tends to be inflationary, so this is a plus for gold and I
think it will help continue the upward trend that we've been
seeing in gold," said Bill O'Neill, managing partner of LOGIC
Advisors in Upper Saddle River, New Jersey.
"This is going to help all the precious metals and should
help the copper market as well. And the Fed left open the
possibility of further rate cuts. That was very significant,"
O'Neill said.
The Federal Reserve cut U.S. interest rates by a hefty
half-percentage point on Wednesday as part of an aggressive
effort to halt a sharp slowdown in an economy hit by a housing
slump and a credit crunch.
Spot gold <XAU=> rose as high as $932 in afternoon trade,
just slightly below its record high of $933.10 reached on
Tuesday. It traded at $921.10/921.80 an ounce by New York's
last quote at 2:15 p.m. EST (1915 GMT), versus Tuesday's New
York close of $928.60/929.30.
In after-hours electronic trade, the active contract for
April delivery at the COMEX division of the NYMEX <GCJ8> traded
as high as $942.20, which marked a record high for gold
futures.
"Today's policy action, combined with those taken earlier,
should help to promote moderate growth over time and to
mitigate the risks to economic activity. However, downside
risks to growth remain," the Fed said in a statement, leaving
the door open to future rate cuts. []
A U.S. rate cut reduces the opportunity cost of holding
dollar-priced gold and also tends to weaken the U.S. currency
-- making bullion more attractive for non-U.S. investors.
George Gero, vice president of RBC Capital Markets Global
Futures in New York, said in an email that the Fed's rate cut
extended gold's rally as possible inflationary pressures were
temporarily brushed aside by the Fed.
BULLION MOSTLY LOWER BEFORE FED
Prior to the Fed's rate announcement, bullion was mostly
trading in the negative territory as investors took profits due
to a mixed bag of data as a strong U.S. private employers job
data countered a report showing weaker-than-expected U.S.
fourth-quarter growth.
The supportive impact of crippled mine output in major
producer South Africa faded as power was restored to some
operations on Wednesday, but traders and analysts said the U.S.
central bank's decision was the solid focus of the day.
Lower physical buying by India due to record prices has
also taken a toll on market sentiment, but dealers contended
that other factors, such as investment demand and the dollar,
were more important now in driving the yellow metal.
"Right now, in my opinion, jewelry demand is not the
primary force behind the rise in the metal. I think it's
basically central bank buying from Asia and the Middle East
countries in a move to dump the dollar. Ultimately I think the
dollar is the major factor," Greenberg said.
Platinum <XPT=> dropped to $1,684/1,688 an ounce from
$1,705/1,710 late in New York on Tuesday, when the metal spiked
to an historic high of $1,735 an ounce.
Dealers said supply concerns persisted even though South
African miners had resumed some operations on Wednesday after
the state power firm promised to boost to boost supplies this
week to mines crippled by outages. []
Anglo Platinum <AMSJ.J>, the world's top platinum producer,
said it had resumed mining at full capacity based on 80 percent
power supplies to its operations, but was not concentrating,
smelting or refining. []
"Platinum is much more fundamentally driven than gold. The
South African situation is critical, given it accounts for
nearly 80 percent of (world) production," Dan Smith, metals
analyst at Standard Chartered said.
In other bullion markets, the benchmark Tokyo gold futures
<0#JAU:> ended 6 yen per gram lower at 3,182 yen.
Silver <XAG=> rose to $16.80/16.85 from $16.68/16.73 an
ounce in New York and Tuesday's 27-year high of $16.80.
Palladium <XPD=> dipped to $386/389 from its previous U.S.
finish of $389/392.
(Additional reporting by Atul Prakash and Veronica Brown in
London)
