Is Gold Set To Reverse?

On Wednesday, the Fed released its most recent monetary policy statement. How can it affect the gold market?

In line with expectations, the Fed kept interest rates unchanged at 1.25 percent. As it was predicted, the statement was little changed, but the U.S. central bank acknowledged the subdued inflation. It pointed out again that inflation was running below 2 percent, but this time removed the adverb ‘somewhat’. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance. On the other hand, the Fed noted that the labor market had continued to strengthen and argued that economic conditions would evolve in a manner that would warrant gradual increases in the federal funds rate, and described the balance of risks as “roughly balanced”, same as before.

Summing up the statement was interpreted as dovish. As a result the U.S. dooar collapse and sent gold prices north.

Read more:

• Oil fundamental and inertia can push prices to new highs
• Goldman Sachs: “Gold is a better hedge than oil in current market conditions”
• Golden years for Gold
• The end-of-year gold rally continues at full speed
• Gold goes over $ 1,500, big players with estimates for the next year