2016-10-14

Gold Rises on Fed Announcement

The decision not to hike interest rates has once again pushed up gold prices. The U.S. Federal Open Market Committee revealed that despite a divisive discussion among its members at their September meeting, seven of them voted to hold interest rates between 0.25% and 0.5%. They say slow growth, 5% unemployment and inflation below their 2% target are suppressing wage increases. The meeting minutes say: “Among the participants who supported awaiting further evidence of continued progress toward the Committee's objectives, several stated that the decision at this meeting was a close call. Some participants believed that it would be appropriate to raise the target range for the federal funds rate relatively soon if the labor market continued to improve and economic activity strengthened, while some others preferred to wait for more convincing evidence that inflation was moving toward the Committee's 2 percent objective.” Dissenting members worry that if the Fed waits too long, it could have to raise rates aggressively to slow the economy later. The minutes do say the hike could happen “relatively soon." Spot gold was up 0.2% at US$1,255.42 an ounce Wednesday afternoon, hovering above last week's four-month low at US$1,241.20.