A stronger USA currency makes gold more expensive for foreign holders.
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The Federal Reserve Systems which is the central bank of the United States of America (USA) cited increased household spending and increased investments by businesses accompanied by a low rate of inflation in the domestic economy in the USA.
He said that the rise in the United States base interest rate will not spare advanced economies, either.
When the financial crisis hit in 2008, sending the USA economy into a free fall, the Fed lowered rates to the zero to 0.25 per cent range in the hopes cheap money would stimulate spending. Stocks in the US rallied, with the S&P 500 and Nasdaq both rising 1.5%, while the Dow gained 224 points.
The Federal Reserve says further rate hikes could happen, but only gradually as the economy continues to strengthen.
It’s the first interest rate increase in nearly a decade but what does it really mean for you?
On Wednesday, the Fed’s committee improved its economic outlook.
“As the committee has said, we’re watching economic developments closely and we will adjust policy in whatever way is necessary to support the attainment of our objectives”, Fed Chair Janet Yellen said after the announcement.
The rate forecasts, or dot points, from Fed members were a little higher than many expected with 100 basis points of hikes pencilled in for next year and a terminal rate of 3.5 percent.
The remaining eight dealers said the Fed will raise rates by the second quarter.
Dr Oliver said the increase should be seen as positive, with it indicating the USA economy is on its way to recovering to pre-GFC levels. The rate hike was a long-expected vote of confidence in the USA economy, which is the world’s biggest and a crucial market for exporters in trade-reliant Asia. The median projected federal funds rate for 2016 remains at 1.4%, suggesting four rate hikes next year, each by 0.25%.
The analyst’s point out the likely implications of the move made by China in the current month moving away from a managed peg to the U.
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On Wednesday gold seemed to take the announcement of the first United States interest rate hike in nine years on the chin. Palladium fell almost 3 per cent to a session low of $552.22 an ounce, while silver was down 0.7 per cent at $14.08 and platinum dropped 1.5 per cent to $860.34.
