Gold Futures Climb as Fed Keeps Rates Steady; Silver Advances

By Pham-Duy Nguyen

June 26 (Bloomberg) -- Gold surged the most in seven months on speculation the Federal Reserve won't rush to raise borrowing costs to curb inflation. Silver also gained.

The Fed yesterday kept its benchmark interest rate at 2 percent, even as policy makers acknowledged heightening inflationary expectations. Gold reached an all-time high of $1,033.90 an ounce in March as fuel, corn and other commodities soared and the dollar fell to a record against the euro.

``The Fed said that inflation is a major concern, but they're not going to do anything about it, which made gold go ballistic,'' said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. ``The dollar is going to get slammed again.''

Gold futures for August delivery jumped $27.40, or 3.1 percent, to $907.70 an ounce at 8:52 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage gain for a most-active contract since Nov. 23.

Silver futures for September delivery soared 73.3 cents, or 4.4 percent, to $17.34 an ounce. A close at that price would mark the biggest increase since March 5.

Before today, silver advanced 11 percent this year, while gold climbed 5.3 percent.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.