By Myra P. Saefong
Gold futures rallied to their highest level in two weeks late Wednesday in electronic trading.
Many gold investors settled on the notion that the Federal Reserve was actually dovish—in favor of maintaining low interest rates—despite the central bank leaving an interest-rate rise on the table for September.
“The Fed has had numerous opportunities to normalize rates over the past two years and have squandered them all,” said Peter Hug, global trading director at Kitco Metals Inc. in an emailed note after the Fed statement.
After gold futures settled Wednesday, the Fed said it decided to keep its benchmark fed-funds rate unchanged in a range between 0.25% and 0.5%. That was widely expected, but it also hinted that a rate increase was possible at its next meeting in September.
“True to form, they left enough language in today’s release to leave September on the table,” said Hug.
“In my opinion, the judgment of Fed members notwithstanding, what choice do they have but to leave the possibility of a rate hike on the table?,” he asked. “They would look like total buffoons, if they reversed course now.”
To some traders, the Fed’s updated policy statement emphasized a reluctance to lift rates too quickly, in the wake of the U.K.’s decision to exit the European Union, which can be supportive for gold futures.
At 4:30 p.m. Eastern on Wednesday, December gold GCZ6, +0.67% traded at $1,348.80 an ounce, up by more than $14 from the $1,334.50 the most-active contract settled at Wednesday, ahead of the Fed news.