Gold price weakens on US rate decision

Frik Els | December 17, 2014 | 9:39 pm Precious Metals Gold 
Gold price weakens on US rate decision

Gold was trending lower on Wednesday after a US Federal Reserve interest rate decision indicated a rate rise as early as June next year and pointed to continued low inflation.

In late afternoon trade on the Comex division of the New York Mercantile Exchange gold for February delivery was changing hands for $1,186.60 an ounce, down $7.70 or 0.7% from Tuesday’s close after recovering from a dip to $1,182.

The rate-setting Federal Open Market Committee scrapped its forecast that it will keep low interest rates for a “considerable time,” but in new language designed to reassure markets the FOMC said it can be “patient” in deciding when to start raising rates.

The reaction on gold markets were relatively subdued given that higher interest rates is a big negative for gold which produces no yield and is strongly inversely correlated.

The FOMC also lowered its forecast for inflation over the shorter term, another blow to gold bulls who consider the metal as a hedge against rising prices.

The Fed decision also gave another boost to the already rampant US dollar which surged on the news to within shouting distance of more than 8-year high against the currencies of its major trading partners.

Gold and the dollar usually move in opposite directions.

After gains earlier in the day in after hours trade crude oil slipped again with the US benchmark West Texas Intermediate dipping to $55.90 a barrel from a day high of $58.98. Gold and oil prices tend to move in tandem and gold was beginning to look expensive compared to crude.

Another factor that adds pressure to the gold price is a fresh climb in US equities with the Dow Jones enjoying its best day of 2014 and the broader S&P500 index advancing over 2%.

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3 Comments

  • sudah pandai

    I have been inform that Oil retain at USD 60 is a fair value, and “good”.

    NOW the oil is at these lever, but ???????????
    Refer back to the oil value at US 60;
    Gold will be at fair value at 800~900
    iPhone at 200~300

    as so on, just refer to 2000~2005 condition.

    • tunnelportterror .

      not so, because gold has broken away from oil. countries like China, Russia, India are buying it as a form of central bank reserves now, to avoid the collapse of the petrodollar.

      you have to understand, all the information we’re being told about gold prices, is a lie. they say it’s trending down, when it actually is going up, when you check the price. it’s up today

  • tunnelportterror .

    http://goldprice.org/NewCharts/gold/images/gold_1d_o_USD.png

    gold is up to 1208usd/oz. wth writes these false articles ? Yellen couldn’t affect the price of gold if her life depended on it, at least not long turn, because long term it’s going UP, UP, AND AWAY. look at the current and historical data below- every time they print more money, gold goes up, it’s an inflation meter. and during a depression it will go up even more, it becomes a flight to safety

    http://goldprice.org/NewCharts/gold/images/gold_all_data_o_s_USD.png?0.6951974754305789

    also look at the last video, it explains why. Rothschilds family greed

    https://www.youtube.com/watch?v=NzLIz27GqWs

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