Gold Recovers Pre-Fed Drop to End Weds Unchanged; Lone Dissenter Votes for Rate Hike to Curb Inflation

From Chris Mullen at GoldSeek.com...

Gold rose to $890.60 in Asia ahead of the US Fed's interest-rate decision on Wednesday, before falling to an 8-session low of $873.50 by late morning in New York.

The Gold Market then rallied back higher into the close, rising further after the Federal Reserve left Dollar rates on hold as expected to trade just $2 down overall from Tuesday's close.

The Gold Price in Euros fell 1.5% before bouncing to €566 per ounce. Platinum lost $10 to $2008.50, and copper fell slightly to about $3.78.

Gold and silver equities fell over 2% by a couple of hours into trade, but they then rallied back higher for most of the rest of trade and ended near unchanged.

Although the Fed voted to keep the key Fed funds rate unchanged at 2% and the discount rate unchanged at 2.25%, Richard Fisher of the Dallas Fed dissented and wanted an increase in rates – the first such vote since Dec. '06.

The committee said in its accompanying statement that it expects US inflation to moderate later this year and next year, but uncertainty remains high. The overall message – much anticipated by analysts and traders – was that downside risks to economic growth have diminished, while upside risks to inflation have increased.

That doesn't equate to real action, however, and the Fed also noted that financial markets are still under considerable stress.

Further poor economic came Wednesday, with May's Durable Goods Orders reported flat as expected, while New Home Sales rose only slightly.

Thursday at 08:30 EST brings Initial Jobless Claims for last week, expected at 375,000, plus first quarter GDP (expected at 1.0%) and the Chain Deflator expected at 2.6%.

Existing Home Sales for May follow, expected at 4.95 million annualized.

Crude oil fell sharply after crude the US reported inventory stockpiles building 800,000 barrels last week, rather than an expected drawdown of nearly 1 million barrels. But the price of oil did cut its near $5 loss roughly in half by the close as the Dollar started to fall after the Fed's statement.

Treasury bonds erased most of their early losses as the US central bank confirmed it's in no hurry to actually raise interest rates, regardless of any concerns over inflation it may voice.

The Dow, Nasdaq, and S&P traded modestly higher for most of the day on those lower oil prices. The Fed statement did not deliver any big surprises, but gains in the Dow and S&P were cut to minimal by the close.

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