That environment and the Fed’s support of a take-it-slow approach to raising benchmark us interest rates have combined to weaken the dollar and lift commodities priced in the currency, like precious metals.
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Spot gold rose for the fourth straight day, up 0.1 per cent at $US1,337.28 an ounce, after rising 0.5 per cent to $US1,343.64, the highest since September 8.
The committee noted that inflation still has not risen to the Fed’s 2 percent target. “And you could argue the (stock) market was satisfied that you didn’t see a Fed anxious to raise rates dramatically”, said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. While most Fed officials foresee a gradual increase of rates, one member expected the rate to be little changed from the 0.65 percent level all the way through 2019.
The two-day rally in gold prices ran into resistance Friday morning, a sign the Fed-induced rally was beginning to waver.
Federal Reserve Board Chair Janet Yellen told reporters Wednesday that although the Fed is holding its benchmark interest rate steady, she still expects it to raise the rate this year. The committee does have a meeting in November just before the presidential election, but a rate hike seems highly unlikely because it might be seen as affecting the vote. There are two meetings left this year, and a rate hike seems probable.
Bloomberg reported from Singapore and NY on Saturday that the precious metal was heading for the biggest weekly advance since July after USA central bankers opted to leave interest rates unchanged while reining in their outlook for future increases.
The dollar index.DXY, which measures the greenback against a basket of six major currencies, extended its decline to a five-day low of 95.515, off more than 0.50 percent and down from a more than six-week high of 96.333 touched earlier. The Standard & Poor’s 500 index picked up 23.36 points, or 1.1 percent, to 2,163.12.
ANALYST’S TAKE: The Fed said the case for a rate hike “has strengthened, but they will need more evidence of continued progress towards its objectives”, said Margaret Yang of CMC Markets in a report. The yield on the 10-year Treasury note fell to 1.66 percent from 1.69 percent.
According to Markit, the latest PMI figures put the Eurozone economy on pace to grow just 0.3% in the third quarter. US gold futures for December delivery were down $5.30 an ounce at $1,339.40.
In European markets, Germany’s DAX and France’s CAC-40 were down 0.4 percent and 0.6 percent respectively while the dollar softened by 0.1 percent to 1.1279 against the euro.
The metal has been boosted by the Fed moving in a more dovish direction, ABN Amro analyst Georgette Boele said. It rose as much as 1.7 percent in the previous session.
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While Tokyo is on holiday on Thursday, stocks closed up 1.9 percent on Wednesday after the BOJ’s shift to targeting a positive yield curve, a move that was considered bullish for banks, insurers and pension funds.
