Gold rallies ahead of Fed interest rates decision, mining stocks rise in London

Gold advanced ahead of today’s meeting of the Federal Open Market Committee (FOMC), which is set to make a decision on interest rates. While no change is expected to the current ultra-low rates, the Fed’s report could give indications as to when it could raise the borrowing costs, which depends on the strength of the ongoing economic recovery.
A positive assessment of the economy could signal an imminent decision on hiking the interest rates, which could come as soon as Q3. Low interest rates support the demand for gold, which is seen as an inflation hedge.
US dollar declined to further strengthen gold, which is seen as a riskier investment alternative and usually moves inversely to the American currency.
Gold was on the rise yesterday despite speculation of the possible launch of a European Monetary Fund to confront the debt problems that have been ravaging several euro zone countries, keeping the euro under pressure for weeks. Last Friday, the president of the European Central Bank Jean-Claude Trichet said that such a proposal could be considered.
Gold rallied to US$1,123/oz late in the afternoon, while silver reached US$17.43/oz. Platinum declined to US$1,619/oz, cooling off after last week’s rally.
All major miners posted gains today with the sole exception of silver producer Hochschild Mining (LSE: HOC), which lost less than 1%.
Silver and gold miner Fresnillo (LSE: FRES) led the sector in the FTSE 100 with a gain of 1.6%. Gold producer Randgold Resources (LSE: RRS) followed, adding nearly 1%, while platinum miner Lonmin (LSE: LMI) rose marginally.
Specialty chemicals firm Johnson Matthey (LSE: JMAT) held steady.
Gold miner Petropavlovsk (LSE: POG) led the midcaps, advancing 2.3%, while Aquarius Platinum (LSE: AQP) added 1.5%.
Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) was one of the leading performers among the juniors, advancing 4.5%.
Africa operating gold miner GMA Resources (AIM: GMA) and South American based explorer Mariana Resources (AIM: MARL) slipped 12% and 5.5%.

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