Gold maintained gains after the Federal Reserve boosted U.S. interest rates for the first time since 2006 while signaling that the pace of subsequent increases will be “gradual.” Silver and copper also held on to earlier increases.
The Federal Open Market Committee unanimously voted to set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent.
Most metals are headed for an annual loss as signs of a strengthening U.S. labor market boosted speculation that the Fed would tighten monetary policy. Higher rates cut the appeal of metals, which don’t pay interest like competing assets. With gold trading near the cheapest since 2010 and copper close to a six-year low, some traders say prices may be near a bottom as the focus shifts to the timing of the next rate increase.
The Fed move “is already priced in,” said Chris Gaffney, president at EverBank World Markets in St. Louis. “The indication from this is that the global economy is doing well enough for the Fed to go ahead and start moving interest rates higher, and that means inflation may be coming back and that’s what’s going to drive the metals market.”
Gold for immediate delivery climbed 1.1 percent to $1,072.97 an ounce at 2:20 p.m. in New York.
Copper futures for March delivery advanced 0.8 percent to $2.0725 a pound on the Comex in New York in electronic trading.
Gold dropped seven of the past eight weeks and copper last month declined to the lowest since 2009 as improving economic data boosted the U.S. dollar, curbing the appeal of metals as alternative assets.
The Philadelphia Stock Exchange Gold and Silver Index of 30 producers climbed 3.3 percent. A gauge of 18 base-metals companies tracked by Bloomberg Intelligence rose 1.6 percent.
“The Fed successfully conveyed that the hurdle for the next rate hike will be substantial,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp. in New York, said in a telephone interview before the announcement.