What The Latest FOMC Announcement Means For Gold Prices

September 22nd, 2016 by Trefis Team
+33.60%
Upside
38.44
Market
51.36
Trefis
NEM: Newmont Mining logo
NEM
Newmont Mining

The Federal Reserve left interest rates unchanged in its latest Federal Open Market Committee (FOMC) meeting, a move that is likely to provide a short term boost to gold prices. The following chart illustrates how spot gold prices reacted to the FOMC announcement at 2 pm EDT yesterday.

FOMC announcement gold prices

Source: Kitco

Gold is considered a safe-haven asset from an investment point of view, with macroeconomic uncertainty tending to increase investor interest in the metal. In addition, since investments in gold offer only capital gains (with no interest/coupon component), rising interest rates tend to negatively impact gold prices. Moreover, with rising interest rates usually indicative of improving economic conditions, the investment demand for safe-haven assets such as gold tends to decline.

With low energy and import prices keeping inflation below the Fed’s long-run inflation objective of 2% and the labor market still improving, the Federal Reserve has decided to maintain the target range for the Federal Funds rate at 0.25-0.50%. [1] Though the announcement to keep interest rates steady will support gold prices going forward, steady improvements in the labor market have boosted the case for an interest rate hike. [1] The timing and the pace of future Fed interest rate hikes will certainly influence the trajectory of gold prices going forward, with future rate hikes expected to negatively impact prices. However, with uncertainty abounding in the wake of the UK’s June 23 EU referendum amid subdued global economic conditions, gold prices are likely to remain elevated in the near term. Check out our forecasts for gold prices.

Have more questions about Newmont Mining? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Newmont Mining
Relevant Articles
  1. Is Newmont Stock Attractive Post The Q2 Sell-Off?
  2. What To Expect From Newmont’s Q1 2023 Earnings
  3. What’s Happening With Newmont Stock?
  4. Why Newmont Stock Looks Attractive
  5. What’s Next For Newmont Stock After A Tough Q2 Report
  6. Will Newmont Stock Bounce Back?

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology

Notes:
  1. Press Release, Federal Reserve Website [↩] [↩]