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Oil and gold surge, dollar falls on Fed action

September 13, 2012: 2:47 PM ET

Commodity prices shot up as soon as the Federal Reserve announced QE3.

Oil and gold prices surged Thursday after the Federal Reserve announced another round of stimulus measures that many investors say could significantly weaken the U.S. dollar.

In its third round of quantitative easing, the Fed plans to buy $40 billion in mortgage-backed securities each month for an indefinite period of time. In addition, the central bank said it plans to maintain its easy monetary policies even after the economy begins to recover.

Investors had been expecting the Fed to announce some form of stimulus at the conclusion of its latest policy meeting, but the statement was stronger than many had anticipated.

"This is full blown QE3," said Doug Roberts, chief market strategist for Channel Capital Research, using the shorthand for this third round of quantitative easing. "It's adding liquidity to the system, and that's always good for the market."

Gold prices surged $38.40, or 2.2%, to settle at a seven-month high of $1772.10 an ounce. Oil prices were up $1.11, or 1.1%, to $98.11 a barrel. The prices of silver and copper rose following the Fed's announcement as well.

Related: Check commodities prices here

In the currency market, the U.S. dollar came under pressure against the euro, Japanese yen and U.K. pound. For example, it declined more than 0.4% against the euro to about $1.30.

Investors viewed the Fed's statement as a signal the central bank is willing to accept a weak U.S. dollar as it attempts to revive the ailing economy, said James Cordier, president of commodities broker Liberty Trading Group.

"The U.S. is going to be printing money at an even faster pace than in Europe," he said. "I'm not a gold bug, but this is clearly an attempt to weaken the currency."

Many investors view gold as a hedge against currency depreciation, which can occur when a central bank increases the money supply. "Gold became a currency this afternoon," said Cordier.

Meanwhile, oil is priced in U.S. dollars on the global market and a weaker greenback makes oil futures more attractive to buyers in other currencies.

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Ben Rooney
Ben Rooney
Staff writer, CNNMoney

Ben Rooney is a staff writer for CNNMoney. He covers the European debt crisis and other international finance stories, in addition to writing about stocks, bonds, investing and other Wall Street-related news. Follow Ben on Twitter: @ben_rooney

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