Gold rose to a six-month high on Friday, extending a 2% rally from the previous session while crude oil futures in New York rose to the highest price in four months after the Federal Reserve announced another round of quantitative easing that could significantly weaken the US dollar.
The Fed policymakers said that it will buy US$40bn of mortgage-backed debt per month until the job market improves substantially as long as inflation remains contained.
The central bank will continue its purchases of mortgage-backed securities and undertake other asset purchases if the outlook for the labor market doesn’t improve substantially, the FOMC said yesterday.
The US central bank also said that it was unlikely to raise interest rates from current lows until at least mid-2015, extending the time frame for such a move from late 2014.
The FOMC action and the accompanying statement were stronger than many had anticipated.
Spot gold climbed as high as US$1,774.96 an ounce in early Asian trade, its highest since February 29, and eased slightly to US$1,772.99.
Cash gold is on course for a 2% gain this week - a fourth week of consecutive rises.
The most-active US gold futures contract also hit a near six-month high, at US$1,777.5, before edging back to US$1,775.70.
Holdings of SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, inched up 0.2% on the day to 1,292.432 tons by September 13.
Other precious metals widely used in industrial applications also climbed to their highest in about six months.
Silver rallied to a six-month high of US$34.92 an ounce earlier, before easing to US$34.75. It was headed for a 3% weekly rise, extending a winning streak to a fourth week. Silver prices are up by ~25% over the past month.
Spot platinum jumped 2% to a six-month high of US$1,712.24 an ounce, as concerns about supply deepened following the labour unrest in top producer South Africa's mining sector.
Spot palladium struck a six-month high of US$694.50, before paring some gains to US$690.30.
Gold prices surged US$38.40, or 2.2%, to settle at a seven-month high of US$1772.10 an ounce yesterday.
Oil prices were up US$1.11, or 1.1%, to US$98.11 a barrel in New York trading on Thursday.
The prices of silver and copper also rose following the Fed's announcement as well.
US dollar came under pressure against the euro, Japanese yen and UK's pound. It declined more than 0.4% against the euro to about US$1.30.
Bond-buying by central banks, effectively printing of cash, raises the inflation outlook and increases gold's appeal as a hedge against rising prices.
Oil is priced in US dollars on the global market. So, a weaker dollar makes oil futures more attractive to buyers in other currencies.