Why gold prices spiked after the Fed decision

Why gold prices spiked after the Fed decision

Last Wednesday we saw Gold futures settle and it rallied to their highest level in two weeks late Wednesday in electronic trading. The Fed said it decided to keep its benchmark fed-funds rate untouched in a range between 0.25% and 0.5%. This was no surprise and expected, but it also shone the light on a possible rate increase after their next meeting in September.

Peter Hug head of global trading director at Kitco Metals Inc said “The Fed has had numerous opportunities to normalize rates over the past two years and have squandered them all,”

He went on to say “In my opinion, the judgment of Fed members notwithstanding, what choice do they have but to leave the possibility of a rate hike on the table?” he asked. “They would look like total buffoons, if they reversed course now.”

This may look to some traders that the Fed’s updated policy statement emphasizes a reluctance to lift rates too quickly, in the aftermath of the U.K.’s decision to exit the European Union, which can be supportive for gold futures.

For gold it’s likely to be a win/win situation,” he said. “If the Fed had sounded more hawkish, stocks might have reacted more negatively and that would have supported gold.”

On Thursday, December gold settles at its highest in about two weeks and if things continue we can see a potential for gold to to hit a 2016 high of $1,376 an ounce by the end of the year.

Category: Gold
Tag: Fed Gold Price USA