“The foreign exchange and gold markets have understood the significant ramifications,” he said. “Moments after the statement, gold surged to a new record, and all foreign currencies spiked” against the U.S. dollar.
“Given that Bernanke is now explicitly committed to inflation, investing in gold and foreign currencies becomes an easy decision,” he said. Euro Pacific is a major booster of gold, which is seen as a hedge against inflation and economic uncertainty.
Other analysts were not as excited about what they saw as an incremental change at the Fed.
Brian Bethune, economist at IHS Global Insight, said the Fed is “overwhelmingly” concerned about the weakening economy and simply sees the fall in prices this year as a warning signal that the economy continues to lose momentum.
“Serious uncertainties hang over the economic outlook,” he said. “Uncertainty over the strength of the recovery, and the postelection policy environment is not playing well in Peoria, and small business confidence remains at recessionary levels.”
John Silvia, chief economist at Wells Fargo Securities, agreed that the Fed primarily is worried about growth and has concluded that more action will be needed.
“Watch for additional accommodation ahead,” he said.