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FOMC Dovish Statement Boosts Gold, Hurt Other Commodities

August 9, 2011 at 21:54 by Vladimir Vyun

Crude oil dropped below $80, while gold rallied to the new high after the Federal Reserve maintained its key interest rate at the record low level and hinted that it may leave interest rates very low for the next two years.

The Federal Open Market Committee said in its statement that “economic growth so far this year has been considerably slower than the Committee had expected”. As result the FOMC decided:

To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The dovish statement reinforced pessimistic sentiment among traders. Gold profited from the negative sentiment, but other commodities, including crude oil and silver, suffered.

Contract for delivery of gold in December gained $29.80 (1.7 percent) to $1,743 per ounce as of 13:49 on COMEX after reaching the record of $1,782.50. Silver futures for delivery in September dropped $1.497 (3.8 percent) to $37.883 per ounce. September futures for crude oil delivery fell $2.01 to $79.30 on NYMEX, the lowest price since September 29.

If you have any questions and comments on the commodities today, use the form below to reply.

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