Gold hit another record high today in its biggest three-day rally since the depths of the financial crisis in 2008, as investors flee to the safe haven investment over mounting concerns of the threat to the global economy from the European and U.S. debt crises.
Spot gold reached just a few cents shy of $1,780 an ounce, though prices then retreated after the New York session opened and U.S. stock market indices climbed on optimism ahead of the FOMC meeting later. Speculation is that the Fed will take action to restore confidence in the financial markets.
The Federal Open Market Committee is scheduled to meet in Washington later today following yesterday’s rout in global stocks. The FOMC plans to issue a statement at about 2:15 p.m. New York time. It is speculated that Fed Chairman Ben Bernanke is weighing the use of more untested policy tools after two rounds of bond buying totalling $2.3 trillion failed to spur sufficient economic growth and did little to reduce unemployment below 9 percent. Some analysts say it may be time for QE3.
Investors are taking a pause from buying gold for now, and some think it was overbought and are unwinding long positions and selling to book some profits, causing prices to ease down to $1,721 by 15:00 GMT.