Gold rallies to new record after Fed; silver bounces

Gold rose to a record high above USD 1,520 an ounce on Wednesday after the Federal Reserve announcement that it would keep US interest rates very low.

It was the eighth record high in nine trading sessions for spot gold. The precious metal rose more than 1% to touch USD 1,523.44 an ounce after the Fed said it would end its USD 600 billion bond buying stimulus program in June as planned.

The Fed also said it was in no rush to raise short-term interest rates that have remained near zero to support the US economy.

James Steel, metals analyst and Senior Vice President at HSBC in New York said the Fed's post-meeting statement had "put the nail in the coffin" of the idea that the Fed was preparing to tighten monetary policy faster than previously thought.

"There will be no speed about reversing policy. Their accommodative policy has been ascribed in part to concerns about higher inflation and also have pumped up commodity demand abroad," Steel said.

"Both of those things are good for gold."

Spot gold was last up 1.3% at USD 1,521.35 an ounce by 2:20 pm EDT (1705 GMT), easing slightly from the earlier record. U.S. futures for June delivery were last up 1.2% at USD 1,521.30, having also touched a record of USD 1,524.20 an ounce.

Fed Chairman Ben Bernanke started the central bank's first post-decision news conference at 2:15 pm EDT, which traders and analysts were watching for further clues on the outlook for monetary policy in the world's largest economy.

The Fed Chairman said he expected a relatively weak number for US GDP in the first quarter, and it would be at least two more meetings before the Fed considered raising rates.

Credit Suisse analyst Tom Kendall said the weak dollar and other drivers for the gold price remained in place.

"It is the dollar, it is sovereign debt, whether that is the US or the periphery of Europe. It is headline rates of inflation in emerging markets and developed markets and it is a bit of geopolitical uncertainty."

Silver hit a 33-year peak on Monday, then tumbled as much as 4.9% in the next session, its largest one-day fall in a month. It reamains on track for a 21% gain this month and a 47% rise this year, which would make it the top performing precious metal and commodity of 2011.

Silver "is definitely in a period of consolidation and I think it would be healthy for the market to trade broadly sideways for at least a few days," said Kendall.

Spot silver was up 3.19% at USD 47.00 an ounce, while US silver was last up 4.2% at USD 46.93.

Implied volatility in silver options has been at its highest this week since November last year as the spot price has swung from lows around USD 43 to highs above USD 49 in the space of a week.

"The recent sharp increase in volatility is an indication of the increasing nervousness of market players and could be a sign that the rally in the silver price is approaching an end," said Commerzbank in a note.

Platinum was last up 1.3% at USD 1,822.50 an ounce, while palladium was up 1.4% at USD 763.25.