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Gold futures rallied to their highest level in two weeks late Wednesday in electronic trading.

Many gold investors settled on the notion that the Federal Reserve was actually dovish—in favor of maintaining low interest rates—despite the central bank leaving an interest-rate rise on the table for September.

“The Fed has had numerous opportunities to normalize rates over the past two years and have squandered them all,” said Peter Hug, global trading director at Kitco Metals Inc. in an emailed note after the Fed statement.

After gold futures settled Wednesday, the Fed said it decided to keep its benchmark fed-funds rate unchanged in a range between 0.25% and 0.5%. That was widely expected, but it also hinted that a rate increase was possible at its next meeting in September.

Read: Fed appears more willing to lift interest rates in September

“True to form, they left enough language in today’s release to leave September on the table,” said Hug.

“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.”

To some traders, the Fed’s updated policy statement emphasized a reluctance to lift rates too quickly, in the wake of the U.K.’s decision to exit the European Union, which can be supportive for gold futures.

At 4:30 p.m. Eastern on Wednesday, December gold GCZ6, +0.46%  traded at $1,348.80 an ounce, up by more than $14 from the $1,334.50 the most-active contract settled at Wednesday, ahead of the Fed news.

“Speculation that the Fed might broadcast a more hawkish tone did not materialize,” said Michael Armbruster, principal and co-founder at Altavest.

But “either way, going in to today’s Fed announcement was likely a win/win for gold,” 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 was trading up $14.10, or 1.1%, at $1,340 an ounce, on pace for its best settlement in about two weeks, according to FactSet data.

Kitco’s Hug referred to late Wednesday’s spike as a “scrambling short-covering rally,” that may set up prices for a test of the $1,355 level.

If gold prices top that, they have the potential to hit a 2016 high of $1,376 an ounce, he said.


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