By Kitco News
Wednesday November 02, 2016 14:03
(Kitco News) - After trading at highs for most of the session, gold is holding onto its gains with prices above $1,300 an ounce as the Federal Reserve leaves the door open for a rate hike in December.
As expected the U.S. central bank left its interest rates unchanged, within a range between 0.25% and 0.50%, following its monetary policy meeting. The Fed’s decision to maintain the status quo was expected by almost all economists as today’s meeting is less than one week before the U.S. presidential election.
While leaving rates unchanged, the Fed remains fairly optimistic on the U.S. economy, saying in its monetary policy statement that “economic activity has picked up from the modest pace seen in the first half of this year.
The committee added that near-term risks to the economy are “roughly balanced.”
Positive for gold is the fact that the Federal Reserve is seeing an increase in inflation pressures.
“Inflation has increased somewhat since earlier this year but is still below the Committee’s 2 percent,” the committee said in its statement.
Unchanged from September’s statement, the Fed continues to support the idea of a rate hike sooner rather than later.
“The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives,” the statement reiterated.
Two committee members voted against the decision. Kansas City Fed President Esther Geroge and Cleaveland Fed President Loretta Mester voted in favor of an immediate rate hike. At the previous meeting there were three disenters.
Royce Mendes, senior economist at CIBC World Markets, said that although the Fed meeting was an uneventful nonevent, the statement did have a hawkish tone to it, which supports the view of a move at the end of the year.
“Overall, barring a material weakening of the economic outlook or significant volatility in financial markets, we continue to see the FOMC raising interest rates at its December meeting,” he said.