Gold stays supported after US FOMC holds rates

The spot gold price stayed supported during Asian trading hours on Thursday after the US Federal Open Committee (FOMC) on Wednesday kept the Federal Funds rate unchanged.

Spot gold was last at $1,333.30-1,333.70 per ounce, up $0.75 from Wednesday’s close. Trading ranged at $1,332.55-1,335.25 so far. The spot gold price had surged to a two-week high of $1,342.15 on Wednesday.

The spot gold price is expected to trek higher in the near-term after the US FOMC decided to hold interest rates, China’s Zhengjin Precious Metals said on Thursday morning. The broker sees short-term support at $1,320 and resistance at $1,355.

“[But] indications out of the Federal Reserve that a 2016 rate increase is still very much a live possibility may restrict gains to gold above $1,340,” MKS Group said on Thursday morning.

The FOMC kept interest rates unchanged at 0.25-0.5 percent as widely expected but the policy board laid down the groundwork for an increase in the coming months.

“The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives,” the FOMC policy statement said.

The FOMC vote for a September was spilt, however. Three FOMC members – Esther George, Loretta Mester and Eric Rosengren – dissented, preferring to raise rates now. This is an unusually large number, which indicates that policy board is split.

Federal Reserve chairwoman Janet Yellen at a post-meeting press conference acknowledged the stronger case for a rake hike at this meeting but noted that it was reasonable to wait to see more progress towards its objective. 

“[Yellen] would not be specific on dates, but it seems she is setting the market up for the likelihood of a December hike, subject to a still growing economy, stable markets and overseas developments,” National Australia Bank said on Thursday morning.

Currently, only 14.5 percent of market participants see a rate increase during the FOMC’s November meeting, while the majority of close to 60 percent reckons the rate hike will come in December, according to the CME Group FedWatch tool.

Earlier on Wednesday, the spot gold price had also received a boost after the Bank of Japan maintained its 0.1 percent negative interest rate and overhauled its monetary stimulus programme.

In currencies, the US dollar index fell 0.01 percent to 95.48 so far on Thursday. It had surged as high as 96.32 on Wednesday after the BoJ announcement sank the yen.

In equities, the Shanghai Composite increased 0.82 percent to 3,050.75 recently.

In data released Wednesday, China’s CB leading index rose 0.9 percent month-on-month in August, up from 0.6 percent in July.

US data including unemployment claims, HPI, existing home sales and CB leading index are due later today. European Central Bank president Mario Draghi is also set to speak in Frankfurt later on Thursday.

In other commodities, the Brent crude oil spot price rose 0.4 percent to $47.23 per barrel, and the Texas light sweet crude spot price gained 0.35 percent to $45.72 recently on Thursday.

In equities, the Shanghai Composite dipped 0.09 percent to 3,020.33 so far in the day.

In other precious metals, silver was last at $19.83/19.85, up $0.03. Platinum rose $7 to $1,052/1,058, and palladium gained $6 to $685/690 recently on Thursday.

On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 287.85 yuan per gram, and the December silver was flat at 4,423 yuan per kilogram.

(Additional reporting by Tom Jennemann)

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