GOLD futures has risen to a 27-year high, following bigger than expected interest rate cuts by the United States Federal Reserve, with some forecasting the precious metal could reach $US800 per ounce this year. Gold's three-month delivery on the New York Mercantile Exchange firmed $11.70 or 1.6% to $735.50/oz in late afternoon trading yesterday, following the Federal Reserve announcement that it would cut interest rates by 50 basis points to 4.75%.
The cut to US interest rates has already seen the US dollar fall against major currencies, with the Australian dollar up 2.25% to 85.25c.
"Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth," the Federal Open Market Committee said in a statement.
The precious metal's rally is the highest in nearly three decades, with gold's all time high at $850/oz reached in January 1980, Argonaut Securities analyst Troy Irvin said.
Irvin told MiningNews.net investors were flocking to the metal as a refuge from recent market volatility, with other factors also helping to stroke the price.
"There are inflationary pressures with a rising oil price, the drop in the US rates is also inflationary, and there are still the overlying geopolitical issues around the world," Irvin said.
"These are bigger picture issues but that's how we see it."
Irvin added it was conceivable gold could reach $800/oz by year-end, and Dow Jones Newswires reported that if the Federal Reserve targets further interest rate cuts to 3.75%, gold could continue on its upward trajectory path.
However the short-term outlook for gold may not be so rosy, with some analysts forecasting a correction to $680-$690/oz.
"It's had a good run of late, in the shorter term it could be in for a price correction, but we're not sure," Irvin said.
Meanwhile, Australian gold miners were boosted by the gold price rally, with most trading in positive territory at time of writing.
Sino Gold added 30c (4.8%) to $6.55, Bendigo Mining added 1.5c (4.8%) to 33c, Lihir Gold firmed 14c (4%) to $3.64 and Newcrest Mining gained 92c (3.5%) to $27.22, bringing its weekly returns so far at 18.97%.
Of course a few bucked the trend, with Intrepid Mines losing some of the ground it made yesterday when the company announced it would merge with Emperor Mines, shedding 2.5c (7.7%) to 30c.
Tectonic dipped 0.2c (2.4%) to 8.3c and Newmont Mining – where its vice chairman Pierre Lassonde forecast gold to reach $1000/oz at this year's Diggers & Dealers forum – lost 11c (2%) to $5.39.
Gold's three-month delivery price on the COMEX was at $723.70/oz this morning while its spot price was at $723.30/oz
