Gold News

Gold Unmoved by Fed's "No Change" Decision Amid Stock & Bond Turmoil; AIG Sinks After-Hours on "Conservator" Plan

From Chris Mullen at

Gold Prices rose $6.55 to $789.80 and silver climbed $0.13 to $11.18 by midday in London on Tuesday, but both metals erased those gains at the New York open as US stocks sank for the second day running.

Gold Bullion and silver remained near their New York lows for the rest of the day, finally closing with losses of 0.7% and 5.2% respectively. At the time of writing there has been little reaction in precious metals to the Fed's decision to hold Dollar interest rates at 2.0% – rather than cut – in after hours access trade.

The Fed's Open Market Committee voted unanimously to leave the Fed funds rate unchanged despite recent expectations for a cut of at least 25 basis points. They noted that the inflation outlook remains highly uncertain (Aug.'s headline rate came in today 0.1% below July's elevated figure of 5.6% annually; so-called “core inflation” stripping out food and energy added 0.2% month-on-month), while economic growth appears to have slowed recently.

Strains on financial markets have increased significantly, the FOMC also said.

Wednesday at 08:30 EST brings US Building Permits for August, expected at 925,000 annualized, plus Housing Starts – expected at 950,000.

Back in Tuesday's action, meanwhile, crude oil fell again on worries over slowing demand despite expectations for large inventory draw-downs in tomorrows data as well as new concerns over Iran’s nuclear development.

The US Dollar index rose after the Fed surprised many by not cutting rates. There were even reports of loud booing on the floor of the NYSE after the announcement.

Treasury bonds ended well off their sharply higher early levels as the Dow, Nasdaq, and S&P eventually rose and ended with over 1% gains on hopes over a deal for AIG.

The world's largest insurance group continued to plunge after-hours, standing six-sevenths below last week's close on rumors of a possible “conservatorship” – to match the recent nationalization of Fannie Mae and Freddie Mac – now being considered by the US Treasury.

The Gold Price in Euros fell Tuesday to about €550, platinum lost $112.50 to $1059, and copper dropped another 5 cents to about $3.13.

Gold and silver equities fell over 4% at the open before they rallied back to about unchanged by the Fed decision and then fell back off a bit immediately following the decision, but they then rallied back higher in late trade and ended with about 2% gains.

Chris Mullen is chief content manager of the GoldSeek family of websites, a leading source of gold news, comment and mining-stock data for private and institutional investors.

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