Gold prices under pressure as Federal Reserve leaves interest rates unchanged
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(Kitco News) - The gold market remains under pressure as the Federal Reserve leaves interest rates unchanged and provides little forward guidance on its monetary policy.
As expected, the U.S. central bank left the Fed Funds rate in a range between 5.25% and 5.50% as struck and optimistic tone on the U.S. economy even as it continues to expect to see some weakness.
“Recent indicators suggest that economic activity expanded at a strong pace in the third quarter. Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low,” the Federal Reserve said in its monetary policy statement.
“The U.S. banking system is sound and resilient. Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks,” the statement said.
The gold market is not seeing much reaction to the largely anticipated move. December gold futures last traded at $1,988.50 an ounce, down 0.29% on the day.
Adam Button, head of currency strategy at Forexlive.com, noted that changes in November’s statement doesn’t offer any new insight compared to what was released last month.
“There was some angst about larger changes but this is pretty much what was expected,” he said.
Andrew Hunter, deputy chief U.S. economist at Capital Economics said that with he thinks it’s unlikely the Federal Reserve will lower interest again as inflation continues to cool.
“While there is still a chance that the Fed will squeeze in a final 25bp hike at the December or January meetings if economic growth continues to surprise on the upside, the recent surge in long-term bond yields suggests that is increasingly unlikely. Even if growth remains stronger than we forecast, the conditions are already in place for inflation to continue falling regardless – and at a faster pace than officials expect,” he said.
He added that he expects the Federal Reserve to cut interest rates in the first half of 2024.
“Overall, we still expect the Fed’s next move to be a rate cut, with rates falling to a below-consensus 3.25%-3.50% by the end of next year,” he said.