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Gold Surges As Federal Reserve Signals No Interest Rate Moves in 2020

December 11, 2019 at 20:23 by Andrew Moran

Gold futures are surging at the end of the Wednesday trading session as the Federal Reserve left interest rates unchanged and signaled no moves next year. The late-session push may have taken investors by surprise since it was widely anticipated that the central bank would hold rates steady. But its safe-haven appeal may diminish to close out of 2019 due to the Fed’s upbeat view of the economy, the USMCA moving ahead, and a potential 13th-hour US-China trade deal in the works ahead of Sunday’s tariff deadline.

February gold futures soared $15.00, or 1.02%, to $1,483.10 per ounce at 19:06 GMT on Wednesday on the Comex division of the New York Mercantile Exchange. The yellow metal had been trading relatively flat in recent sessions, but it is still up more than 15% year-to-date.

Silver, the sister commodity to gold, also recorded a late push in the middle of the trading week. March silver futures advanced $0.285, or 1.7%, to $16.985 per ounce. The white metal has recorded tepid gains this week, lifting its 2019 performance to just under 10%.

On Wednesday, the Federal Reserve concluded its final two-day policy meeting for 2019 and it provided a glimpse into what we can expect next year. The Federal Open Market Committee (FOMC) left interest rates unchanged at a target range of 1.50% and 1.75%, which was mostly expected by markets. Policymakers chose to continue suspending its mid-cycle adjustment on a strong economy and labor market and low inflation.

This year, the Fed slashed rates three times, but do not anticipate 2020 to mirror 2019. In its December policy statement, the central bank signaled zero rate moves in the new year, according to the dot-plot. However, Chair Jerome Powell noted that the Fed will act as appropriate to sustain the economy.

The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate.

The language was consistent with previous policy statements.

Despite impressive midweek gains, precious metals’ ascent may be short-lived on new developments. The USMCA is expected to be ratified by the US government next week. With the December 15 deadline of US tariffs on China, experts believe the two sides will squeak out a deal at the last minute.

On the data front, the consumer price index climbed 0.3% last month, raising the 12-month inflation rate to a one-year high of 2.1%. The market had forecast a 0.2% jump.

In other metal markets, February copper futures rose $0.03, or 1.07%, to $2.795 a pound. February platinum futures spiked $23.70, or 2.57%, to $946.40 an ounce. February palladium futures soared $21.90, or 1.17%, to $1,891.00 per ounce.

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