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Gold Extends Rally Beyond $960 Level

Gold pushed above the $960 mark, extending its rally as commodity markets continued to trade strongly after the Federal Reserve said it would buy $300bn in US Treasuries to counter the financial crisis.

The Fed's plans have led to renewed concerns about the outlook for the dollar and inflation, pushing gold higher for a third session.

Gold traded at $960.65 a troy ounce, moving between a low of $951.40 and a high of $966.70, after ending trading in New York on Thursday at $958.60.

"We think that the Fed's action will change the focus of the gold market from risk appetite/aversion back toward the dollar and prospects for inflation," said Tom Pawlicki, precious metal analyst at MF Global: "This outcome could attain greater credence if the stock market has in fact bottomed."

The Fed's move was viewed as broadly positive for commodity markets as traders said it should support economic recovery and push investors out of government debt and into riskier asset classes.

However, James Steel of HSBC cautioned: "Given that the genesis of the wider commodity rally appears to be the shift in policy by the Fed and not a sudden change in the underlying supply/demand balances, it is unclear whether higher commodity prices can be sustained."

Oil prices continued to trade above the $50 a barrel but Nymex April West Texas Intermediate retreated 80 cents to $50.81 a barrel while ICE May Brent lost 57 cents at $50.10 a barrel.

Base metals were mixed following Thursday's strong gains. Copper slipped below the $4,000-a-tonne level, easing 0.6 per cent to to 3,960 a tonne, under pressure from a rise of 10,500 tonnes in London Metal Exchange Stocks.

Aluminium extended its rally, rising 0.6 per cent to $1,475 a tonne.

SOURCE: http://www.ft.com/cms/s/0/b0333070-1536-11de-b9a9-0000779fd2ac.html

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