Today is the day that the Federal Reserve is going to make a decision on whether or not to raise the key interest rates, something which has not been done in nearly a decade. This decision has been a long one in the making, and ahead of the Federal Reserve decision, gold has surged to their highest levels in a week. This is a big deal for investors of gold and the companies that are behind this precious metal.
The surge in gold is partially due to the weaker dollar and also the inflation declining, but these two things are sending out signals that the Federal Reserve is not going to be touching those interest rates anytime soon. The most actively traded out of all rose $16.40, which is 1.5 percent, with gold now settling to $1,119 a troy ounce. This comes from the Comex division of the New York Mercantile Exchange, and it was actually the highest closing for gold since September 8, although gold has been doing really well the past week all the way around. There has been a lot of pressure though on gold in past month, as the date for the Federal Reserve to announce whether or not interest rates would go up or not has gotten closer. This would be a huge policy shift, indicating that the Federal Reserve believed the American economy was finally out of the Great Recession, and on a strong road to recovery. Through the past month, economists and Wall Street investors alike have been both positive and negative about what will happen, although mostly everyone agrees it will rise before the end of the year, with some pointing to December as when the interest rates will go up.
Once this interest rate hike happens, it will likely mean gold will drop in value, since it does cost money to hold onto and it also does not pay interest, all of which are key issues investors face when deciding where to invest. It seems that within the past week, the same time gold began to rally, investors have been more pessimistic about the interest rates going up during the September 17 meeting, thinking it will be held off until the end of the year due to concerns of China’s economic slowdown. Dave Meger, the director of metals trading at High Ridge Futures in Chicago, Illinois, said that the prospect of the Federal Reserve raising the interest rates at this point is very low, which makes things react in a way that they would if there was no hike. New data came out which showed that inflation in the United States fell in August, along with consumer prices falling .1 percent in August from what it was in July. This was the first time since January that the consumer prices have fallen, and these are all signs that point to now not being the time to raise the interest rates, but a good time to buy into gold while the market is looking for protection. There has been some longstanding concerns from the Federal Reserve over the fact that consumer prices have been below the 2 percent target rate the past few months, and if the interest rates were raised at this point, deflation would definitely be a high concern.
Meger said that inflation is one of the biggest focal points that the Federal Reserve is looking at, and he said that the data was disappointing, alluding to it being just another piece of the puzzle that the Federal Reserve has to think about before making its decision on interest rates. The volatility of the economic markets both in America and abroad are also spelling doom for the interest rates to increase during this meeting. Since China has the second-largest economy, the slowdown over there has a lot of influence on the decision, and it also spurs gold prices to go up or down since China affects the global economy. Speaking of the decision to raise the interest rates, we will know later today about whether it will happen. This means that gold could either increase in value even more, or Friday end up lower as the beginning bell we will know the decision. The Wall Street Journal Dollar Index went down to $87.96, which is down .4 percent, and since gold is traded with dollars, the investors who have stronger currencies can drive gold prices even higher. Silver also has been holding strong at $14.90, which is a 3.5 percent increase, and its biggest one-day increase since May. Platinum also went up for the third straight session, and all of these precious metals are surging due to the concerns and uncertainty about the Federal Reserve decision, which is almost upon us.