Gold surges higher after the Fed

POSTED ON March 18, 2015 BY James Fraser
CATEGORY Gold, Stories, The Fed,

Gold prices ended the day up 2.14% to $1172 after the Fed statement was released and a press conference was held with Fed chair Janet Yellen. The bottom line for investors is that the Fed is close to raising interest rates but remains cautious with no specific date yet and lower forecasts for year end. Rates will be held lower for longer which is good news for the unemployed and investors. The US and Canadian markets as well as commodities all had significant intra day moves once the news came out.

US FED chair, Janet Yellen at today's Fed press conference:

“Let me emphasize, however, that the timing of the initial increase in the target range will depend on the committee’s assessment of incoming information. Today’s modification of our guidance should not be interpreted to mean that we have decided on the timing of that increase. In other words, just because we removed the word patient from the statement doesn’t mean we’re going to be impatient.Moreover, even after the initial increase in the target funds rate, our policy is likely to remain highly accommodative to support continued progress toward our objectives of maximum employment and 2% inflation.”

The cautiousness comes from lower than expected growth in the first part of the year. In my opinion it is clear that the lay-offs in the oil industry are having an impact on the US economy and will continue to do so. On the other side of the coin lower oil provides a higher real income for consumers.

The Fed will stay data driven and look for the unemployment rate to continue to improve and have inflation head toward the 2% stated goal before raising rates.

The USD fell on the news over 2% as the majority of major currencies around the world strengthened. The United States debt stands at record highs of over $18.1 trillion and has some analyst wondering if the US can even afford to start hiking rates.

The Fed meets again in June and then in September. Many analysts have now put off any chance of a rate hike to the September meeting.

It is important for resource investors to follow major market moving events like this and try and understand them. Gold tends to have big moves either up or down on days when the Fed releases news on the economy. Strong economic news usually means a lower gold price and vice versa.

Read:Full Text of FOMC statement

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James Fraser

Mr. Fraser joined CEO.ca in October 2014. He is passionate about the mining industry. His passion led to co-authoring the e-book "Mining Stocks Investor Guide: A Guide to Investing in Mining Companies." He has a finance background and has completed his Canadian Securities Course (CSC) and Conduct and Practices Handbook (CPH). When Fraser is not "digging" up the latest mining stock, he can be found enjoying a wide variety of sports or travelling the world. More →

Twitter: @miningstocks

james@miningstocksguide.com

James Fraser

Twitter: @miningstocks

james@miningstocksguide.com

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