Gold, Silver Gain on Speculation Fed Cut Will Weaken Dollar

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Gold and silver prices rose on expectations the Federal Reserve's cut in U.S. interest rates will weaken the dollar and boost the appeal of precious metals as alternative investments.

Gold yesterday rose to the highest since February 1980 after the Fed lowered its benchmark lending rate by half a percentage point, more than economists forecast, to 4.75 percent. The dollar fell to an all-time low against the euro after the announcement. Five of the past six bear markets for the dollar have boosted gold prices.

``The dollar is the most important factor driving gold prices,'' said Matt Zeman, a trader at LaSalle Futures Group in Chicago. ``Look for the dollar to make new lows and gold to continue higher.''

Gold futures for December delivery rose $5.80, or 0.8 percent, to $729.50 an ounce on the Comex division of the New York Mercantile Exchange. After the Fed announcement, the metal reached $735.50, the highest for a most-active contract since Feb. 11, 1980. Gold has climbed 14 percent this year.

Silver futures for December delivery jumped 18 cents, or 1.4 percent, to $13.105 an ounce. The metal is up 1.3 percent this year.

The Fed's first interest-rate cut since 2003 sparked a plunge in the dollar. The euro reached a record $1.3988 yesterday. Investment in the StreetTracks Gold Trust, an exchange-traded fund backed by bullion, soared to a record 576 metric tons.

COCY