Federal Reserve gives gold a reason to rise

Federal Reserve gives gold a reason to rise

The Gold market breathed a collective sigh of relief as Gold futures a reason to climb even further! An hour after the Fed said it would leave interest rates unchanged, but did show some signs on the potential for a rate increase before the end of the year, December gold futures GCZ6 -0.30% were trading at $1,334.30 an ounce.

However investors continue to question if the [Federal Open Market Committee] will be able to move by year-end as central bank sent a mixed message to the markets.

Federal Reserve Chairwoman Janet Yellen said in a statement “We don’t see the economy is overheating now.” justifying the decision not to raise rates. This seems like the Fed will keep rates low until it sees evidence of overheating.

It’s typically known that precious metals tend to draw buying in a low interest-rate climate as rising rates tend to make nonyielding gold less attractive to investors. Higher rates may also boost the value of the dollar which usually moves in the opposite direction of the gold price.

In news this week the U.S. central bank said that the risks facing the economy appear “roughly balanced.” That is the first time the Fed has been so optimistic about the outlook since December, when it raised rates for the first time since 2006.

Right now the appropriate policy seems to be to keep rates low as long as there is some slack in the job market and as long as inflation doesn’t get too high.