Gold Prices Down, But Not Out After Fed Leaves Rates Unchanged
(Kitco News)- The gold market, while down on the day, is seeing littlereaction to the Federal Reserve leaving interest rates unchanged and setting the stage for another interest rate hike in December.
Following its two-day monetary policy meeting, the U.S. central bank left interest rates unchanged within a range between2.00% and 2.25% as expected. However, in its statement, the committee reiterated its expectationsto continue down the path of gradual tightening.
“The Committee expects that further gradual increases in thetarget range for the federal funds rate will be consistent with sustainedexpansion of economic activity, strong labor market conditions, and inflationnear the Committee’s symmetric 2 percent objective over the medium term,” thecentral bank said in its statement. “Risks to the economic outlook appearroughly balanced.”
The Federal Reserve’s continued commitment to raisinginterest rates continues to support the U.S. dollar, which in turn, weighs ongold prices. December gold futures last traded at $1,226.80 an ounce, down0.15% on the day.
The Federal Reserve remains fairly optimistic on the healthof the U.S. economy, saying: “the labor market has continued to strengthen andthat economic activity has been rising at a strong rate.”
However, the committee had little to say on inflation,noting: “On a 12-month basis, both overall inflation and inflation for itemsother than food and energy remain near 2 percent. Indicators of longer-terminflation expectations are little changed, on balance.”
Andrew Grantham, senior economist at CIBC World Markets, said thatthe central bank’s statement is relatively in line with expectations and hedoes not expect to see any major market reaction.
"As expected the Fed kept rates on holdtoday after hiking in the prior meeting, but laid the groundwork for anothermove in December,” he said. “There was no concern raised regarding recentequity market volatility. As such, we expect the current pattern of a hike aquarter to continue through Q1 of next year, before a slowdown in growth andstill only moderate inflation allows the Fed to ease up on the pace of ratehikes later in 2019.”
This is the Federal Reserve’s last monetary policy meetingthat will be concluded without a press conference. Earlier in the year FedChairman Jerome Powell said that in the new year he will hold a pressconference after every monetary policy meeting.
By Kitco NewsFor Kitco News
Follow @kitconewsnow
news@kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.