Fed comments bring sharp rise

Bets that the Federal Reserve Bank would limit the number of interest rate increases in the near term pushed equity markets south of the border to levels they hadn’t seen since 2001. The Dow Jones Industrial Average touched 11,020.15 and rose 294.40 points to 11,011.90 in the five trading days Jan. 3-9, while the Standard & Poor’s 500 index made a high of 1,290.78 and settled 41.86 points higher at 1,290.15. In percentage terms, the Dow was up 2.7% and the broader indicator, 3.3%.

At the Dec. 13 meeting of the Federal Open Market Committee — whose minutes were released on Jan. 3 — the consensus report was that interest rates were now in the range preferred by the Fed’s governors. Yields on 2-year Treasury bonds have also dropped back below 10-year yields, reassuring the market that a credit crunch is unlikely.

Unlike the old days, that kind of news was considered positive in the gold market, and bullion prices ran up to US$541.50 in the afternoon session in London on Jan. 9. The golds responded with a flurry of 52-week highs, for three of New York’s big four and for almost all the big Canadian inter-listeds. Newmont Mining reached a new high of US$58.93 before closing at US$58.51, up US$5.11. Gold Fields touched US$19.65 and finished US$1.70 higher at US$19.33; Harmony Gold Mining was up US99 to US$14.04, having reached US$14.35.

Among mid-tiers, Coeur d’Alene Mines was heavily traded, with 16 million shares moving, and rose US35 to US$4.35.

The difference this week was that the industrial metal producers caught the same bus as the golds: Phelps Dodge rode a bounding copper price to a 52-week high of US$156.90 before settling at US$154.55 for a gain of US$10.68, and BHP Billiton hit US$36.47 on the way to a close of US$36.36, a gain of US$2.94.