Base and precious metals were little changed before Friday’s settlement, but overall both copper and gold hit fresh highs this week following the Federal Reserve’s decision to keep rates accommodative.
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After the Fed’s statement, traders were betting on a 63-per cent chance of a December rate increase, up from 58 per cent just before the statement, according to the FedWatch website.
Bullion rallied 1.7 per cent after the Fed stayed pat on rates but indicated it could still tighten monetary policy in the world’s biggest economy by the end of the year.
Not that the entire Fed was on board.
Fed Chair Janet Yellen, while agreeing that the case for a rate rise had strengthened, argued on Wednesday that it made sense to put off a move for now amid signs that Americans who dropped out of the labor market are returning and looking for work.
Fed chair Janet Yellen, speaking after the central bank’s latest policy statement, said USA growth was looking stronger and rate increases would be needed to keep the economy from overheating and fuelling high inflation.
Nariman Behravesh and Sara Johnson, economists at IHS Markit, said in a client note that the FOMC stance certainly leaned toward a December increase. Energy companies’ stocks followed oil prices higher.
Gold rose to the highest in two weeks after policy makers kept USA interest rates unchanged for a sixth straight meeting and cut their outlook for rate increases next year.
Goldman listed six financial companies that would benefit the most from a potential rate hike: Bank of America Corp (NYSE: BAC), Bank of New York Mellon Corp (NYSE: BK), Citizens Financial Group Inc (NYSE: CFG), Regions Financial Corp (NYSE: RF), Charles Schwab Corp (NYSE: SCHW) and Zions Bancorp (NASDAQ: ZION).
BANK OF JAPAN: The Japanese central bank said it will hold its short-term policy rate at negative 0.1 percent and might cut it further. That is the most dissents among the Fed officials this year.
“The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate – the federal funds rate (interest rate) is likely to remain, for some time, below levels that are expected to prevail in the longer run”. That, in turn, can erode profits.
All 11 major S&P sectors finished in positive territory.
The 500 index notched its best two-day performance in more than two months on Thursday.
Other interest-rate-sensitive investments also have benefited.
– A gauge of 14 senior global gold producers declined 2.2 percent, paring this week’s gain to 5.1 percent.
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That was followed in Washington with the Fed keeping the benchmark federal funds rate at an ultra-low 0.25-0.50 per cent.
