Tags: Precious Metals

How the Fed Is Moving Gold Prices Today

By , Associate Editor, Money Morning • @TaraKateClarke •

Update: Gold prices today (Wednesday) took a dive following the U.S. Federal Reserve's afternoon policy statement and press conference.

This morning, spot gold was on track for a third-straight session of gains, at $1,235.80 an ounce as of 12:30 p.m. EDT. But by 3:30 p.m. (after the Fed's announcements), the yellow metal had dropped $6.80 to $1,229 an ounce.
gold prices today
Source: Kitco

On Monday, gold prices hit an eight-month low at $1,225.30 an ounce. U.S. gold futures were flat at $1,236.20.

Here's how the Fed is affecting gold prices today:

  • Bad for Gold: The U.S. dollar moved toward a 14-month high today. Last week, the dollar rallied to a six-year high against the yen and a 13-month high against the euro, causing the yellow metal to lose nearly 3% of its value.
  • Good for Gold: The Fed re-stated its previous initiative that it'd keep interest rates low for a "considerable time." Interest rates are important for gold investors because low interest rates make gold a more attractive investment. When rates go up, investors typically seek out higher-yielding assets. That the Fed will maintain its near-zero interest rate policy for a while longer supports higher gold prices.
  • Bad for Gold, Part 2: Even though the Fed said it will hold interest rates lower for the time being, there's an overall sense that we're moving closer to a policy shift. The Fed saw enough "strength in the broader economy" to cut its quantitative easing program by another $10 billion.
  • Quote of the Hour: "The dollar spiked a bit," FuturePath Trading broker and futures analyst Frank Lesh said to Kitco. "Overall, that remains a problem for gold. We're a little closer to rates going higher - not that we know exactly when."

While gold prices today hover around an eight-month low, one factor that may turn the yellow metal around is mounting Asian demand. Here's an in-depth look at historical averages from India and China that indicate a bump for gold prices this fall...

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