Spot Gold Extends Gains After Fed Leaves U.S. Rates Unchanged

  • Near-term risks to economic outlook appear balanced, Fed says
  • Focus shifts to December as Fed’s likely chance to raise rates

Spot gold extended gains after the U.S. Federal Reserve left its policy rate unchanged for a sixth straight meeting, saying it would wait for more evidence of progress toward its goals while projecting that an increase is still likely by year-end.

“Near-term risks to the economic outlook appear roughly balanced,” the Federal Open Market Committee said in its statement Wednesday after a two-day meeting.

Gold’s 25 percent rally in the first half of this year has sputtered this quarter, partly because of Fed interest-rate concerns. Tighter monetary policy is typically negative for gold because the metal doesn’t pay interest. While policy makers were expected to keep rates unchanged this week, traders see a 60 percent chance of an increase by December, up from just 12 percent at the start of the quarter.

“The Fed decision is positive for gold,” Mariann Montagne, an Arden Hills, Minnesota-based senior investment analyst at Gradient Investments, which oversees $1.1 billion. “We saw that the rising expectations of higher interest rates in the U.S. have kept a lid on gold. We think speculators would have to cover their short positions.”

Gold for immediate delivery rose 1.5 percent to $1,334.28 an ounce at 4 p.m. New York time, according to Bloomberg generic pricing. The metal fell as much as 0.5 percent earlier.

The central bank’s so-called “dot plot”, which it uses to signal its outlook for the path of interest rates, showed that officials expected one quarter-point rate increase this year. Policy makers see two rate hikes next year, down from their June median projection of three.

— With assistance by Luzi-Ann Javier

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