The Federal Reserve delivered on its long-awaited third round of
quantitative easing (QE3) Thursday, vowing to buy $40 billion worth
of mortgage-backed securities per month, indefinitely, and markets
rallied, notably gold.
In what was a somewhat-delayed response to the expected
bond-buying program slated to kick off as early as Friday, spot
gold prices soared more than 2 percent to cross over the $1765 per
ounce mark, hitting its highest levels since the spring, as Hard
Assets Investor's Commodities Analyst Sumit Roy reported.
The $65 billion SPDR Gold Shares (NYSEArca:GLD), the world's
largest bullion ETF, as well as the second-largest ETF by assets,
soared 2.03 percent, hitting its highest price since February.
Silver's move was even more pronounced. The iShares Silver Trust
(NYSEArca:SLV), for example, jumpped 4.35 percent to close at
$33.61 a share.
Treasury yields climbed immediately following the announcement,
as investors took a breather from piling assets into government
bonds as a way to protect themselves from the economic malaise
hindering U.S. growth. Yields move inversely to bond prices.
But as the session progressed, yields on the 10-year notes moved
lower to end the day at 1.752 percent. How much consumers may
benefit isn't clear amid evidence mortgage lenders may not be
passing all the lower rates to borrowers. In any case, as recently
as late July, 10-year yields had slipped to as low as 1.40
All in all, the U.S. central bank delivered much of what the
market seemed to be anticipating, and it left the door open for
more stimulus ahead as it looks to spark growth in the job market
and in the economy as a whole.
Among its measures, the Fed also extended its pledge to keep its
benchmark overnight interest rate-the federal funds rate-near zero
from late 2014 to mid-2015, Roy reported.
"The U.S. central bank has made it clear that it will provide an
extremely accommodative monetary backdrop as long as economic
growth remains sluggish," Roy said in his report.
The broad stock market also rallied across the board, posting
gains of 1.3 to 1.6 percent, and some of the biggest ETFs in the
space were rallying as well. The $106 billion SPDR S&P 500 ETF
(NYSEArca:SPY) ended 1.6 higher, while the tech-heavy PowerShares
QQQ Trust (NasdaqGM:QQQ) added 1.35 percent.
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