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Federal Reserve Is Fueling Gold as Yellow Metal Hits 2-Week High

July 28, 2016 at 17:44 by Andrew Moran

Gold prices are nearing two-week highs as the Federal Reserve is fueling the yellow metal’s recent gains. After the US central bank announced that it would be leaving key interest rates unchanged, gold has spiked in the last two trading sessions, paring some of its recent weekly losses.

August gold futures climbed $7.16, or 0.54%, to $1,333.76 per ounce at 17:10 GMT on Thursday. Gold prices are on track to settle at their highest levels since July 14. Gold Bounce House For Adults has seen its momentum stalled for the last couple of weeks after making considerable gains following Brexit and weak US economic data.

Silver prices are also steadily rising on Thursday. September silver futures increased $0.20, or 0.98%, to $20.16 per ounce. Silver is on track to close at its highest level since July 16.

Investors have jumped into gold as many view the Fed as dovish. This is the general description of the latest statement from the Federal Open Market Committee (FOMC). After completing its two-day monetary policy meeting on Wednesday afternoon, the Fed left rates unchanged, though it left the door open to a potential hike to interest rates in September. This left investors unimpressed.

The yellow metal would take a hit in a rising rate environment. Holding gold would be less attractive because the opportunity costs would diminish since precious metals do not provide any yield. If the Fed raised rates then investors would be more open to yielding investments, like bonds, and riskier options, like stocks and oil.

According to the CME Group FedWatch tool, there is an 18% chance of a September rate hike by the central bank. That number jumps to 47% in December.

Investors are also paying attention to Japan, where the Bank of Japan (BOJ) is finishing its own monetary policy meeting. It is expected to announce further easing that would complement the government’s $400 billion (2 trillion yen) economic stimulus package. Reports also suggest that Japanese Prime Minister Shinzo Abe would announce the issuance of 50-year bonds that would be available as of March 2017.

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