Bullion of 99.99 percent purity advanced as much as 0.4 percent to 288.09 yuan a gram ($1,343 an ounce) on the Shanghai Gold Exchange. And if we match this up with shifts from the Federal Reserve this year, it makes sense.
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“There was no rate hike, there was the reminder that policy rates are apt to remain low, and stocks rallied on the happy thought that a half-full punch bowl will be kept on the table”, said Briefing.com analyst Patrick O’Hare.
The Fed stood pat on interest rates (http://www.marketwatch.com/story/fed-holds-off-interest-rate-hike-but-only-for-the-time-being-2016-09-21) on Wednesday, but Chairwoman Janet Yellen indicated an interest rate hike is likely by year’s end as she expressed confidence in the USA economy. But in a sign of growing confidence, the Fed said the near-term risks for the economic outlook “appear roughly balanced”.
WALL STREET: Dividend-paying stocks rose on the Fed’s decision.
“We have seen clients favour some of the mining sector”, said Lewis Jones, stockbroker at Cornhill Capital.
Notable gainers outside the PSEi include Cemex (+1.35 percent) and RRHI (+1.14 percent). Yellen was also at pains to emphasise that the upcoming election has no influence (really?) although a 6pt lead for Clinton in the latest poll must be a relief.
France’s CAC 40 rose 1.5 percent in early trading to 4,410.55 and Germany’s DAX added 1.1 percent to 10,556.92. Though the announcement to keep interest rates steady will support gold prices going forward, steady improvements in the labor market have boosted the case for an interest rate hike.
The euro gained 0.4 percent to $1.1229, its highest since Friday and taking it firmly back into the middle of a $1.09-$1.15 range it has held since March.
That could include an increase in its stimulus program or a further cut in the deposit rate as a way to encourage banks to lend money.
Financial markets responded positively to the news with the broad-based Topix index up by 2.5 percent and Nikkei rising by 1.8 percent.
At the end of one of its most anticipated meetings for some time, Fed policymakers said the economy continued to improve and the argument for a rise was strengthening but more evidence of sustained progress was needed.
“If the yen strengthens, the BOJ will drive rates deeper into the negative”, an official at a megabank said.
OVERSEAS: France’s CAC 40 slipped 0.1 percent while Germany’s DAX rose 0.2 percent.
In its updated forecasts, the Fed lowered its expectation for the long-range level of its benchmark interest rate to 2.9 percent, from the 3 percent it had forecast in June and 3.5 percent before then.
Yellen’s answer at Wednesday’s post-meeting news conference was that there is no inflation threat, so there is no hurry; and she said that if the Fed holds off raising rates maybe even more people will find work.
“That really stands out that they’ve become significantly more dovish in their projection materials, but clearly trying to signal to the market that December is very much live”, said David Keeble, New York-based head of fixed-income strategy at Credit Agricole.
Meanwhile, oil prices gained after official data on Wednesday showed a surprise drop in United States weekly crude inventories last week. The yen is now trading at 100.6 per dollar.
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Oil prices rose about 1.8 per cent as the dollar fell and United States crude inventories recorded a surprise drop.
