Gold Down After Federal Reserve Rate Cut

NEW YORK (AP) -- Gold futures fell sharply in aftermarket trading Tuesday despite an aggressive U.S. interest rate cut that boosted other commodities.

Other futures rose broadly, with crude oil, copper and agriculture futures all trading higher.

The Federal Reserve slashed a key interest rate by three-fourths of a percentage point in a bid to free up locked credit markets and kick-start the U.S. economy. The move lowered the federal funds rate to 2.25 percent, the lowest level since in more than three years. Still, many investors had predicted a full point cut.

Gold for April delivery rose $1.70 to settle at $1,004.30 on the New York Mercantile Exchange but pulled back more than $10 after the Fed's decision. The metal traded at $989.60 an ounce in aftermarket trading, down $13.

Investors "are selling on the ... news of a 75 basis point (0.75 percentage point) cut, taking some money off the table," George Gero, vice president of RBC Capital Markets Global Futures in New York, said in a note. "But with the energy rally and weaker dollar, we have to assume setbacks in gold are still buying opportunities at the moment."

Though some analysts warn gold is due for a correction, others say it could still move higher first due to economic worries, record-high crude prices and a tumbling dollar. Gold is traditionally viewed as safe-haven investment during times of economic uncertainty and rising inflation.

The greenback's decline versus the 15-nation euro has been a major driver of gold, which gained 31 percent last year and 18 percent so far this year. A falling dollar encourages buying of gold because the metal is known for holding its value. A weaker greenback also makes dollar-denominated commodities like gold cheaper for overseas buyers.

Other precious metals traded mixed Tuesday. Silver for May delivery fell 24 cents to $20.060 an ounce on the Nymex, while May copper added 5.6 cents to $3.7425 a pound.

In energy markets, oil prices rose as investors bought futures after the Fed's rate cut.

Light, sweet crude for April delivery rose $2.25 to $107.93 a barrel on the Nymex. On Monday, oil prices fell by $4.53 a barrel on fears that the Bear Stearns buyout signaled a widening of economic woes.

Other energy futures also rose. April gasoline futures added 9.07 cents to $2.5949 a gallon on the Nymex, while April heating oil futures added 3.17 cents to $3.1001 a gallon.

In agriculture markets, wheat and corn futures rebounded a day after falling the maximum-allowed limit on the Chicago Board of Trade.

Wheat for May delivery rose 6.5 cents to $11.38 a bushel on the CBOT, while May corn climbed 7.5 cents to $5.4675 a bushel. Soybeans, meanwhile fell 1.75 cents to $13.01 a bushel.

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