Gold prices fell but silver rose Wednesday after the Federal Reserve said it would sell short-dated bonds and replace them with longer-dated ones to keep money cheap and thus facilitate economic expansion.
Equally important, the Fed indicated it will keep its benchmark federal funds rate between zero and 0.25 percent through at least mid-2013 as long as unemployment remains high and the inflation outlook stays subdued.
The Fed said it intends to buy, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of six years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of three years or less. That $400 billion is part of the central bank's $2.85 trillion balance sheet.
The U.S. central bank said the move should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative.
Just such action was widely anticipated by the markets, which remained in a tight range ahead of the announcement. Stock remained mixed after the news but precious metals rose. Treasuries soared, with interest on the 10-year Treasury hitting briefly an all-time low of 1.8765 percent.
The central bank also said it would reinvest principal payments from its holdings of agency debt in mortgage-backed securities instead of in government securities, an acknowledgement of how weak and how critical the nation's falling housing market is.
The committee's decision was opposed by three members, Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.
Gold on the New York futures exchange fell $6 to $1,809.1, and gold for immediately delivery rose $3.02 to $1,780.18. In floor trading earlier, gold settled $1 lower at $1,808.10.
The move boosted silver on expectations of stronger industrial demand, which accounts for about half of silver sales.
Silver on the New York futures exchange rose 34 cents to $40.14, while silver for immediate delivery rose 12 cents to $40.12. In floor trading earlier, silver settled 33 cents higher at $40.67.