Gold Investors Find Confidence In "Quiet Low" Neutral Interest Rates

Neils Christensen

Wednesday March 15, 2017 16:09

(Kitco News) - With one rate hike out of the way, the Fed is keeping a steady hand on the tiller maintaining its forecast for three moves in 2017 and according to some analysts, gold investors are feeling a little more confident as Fed Chair Janet Yellen confirmed that the “neutral rates will be quite low.”

Gold found momentum late Wednesday as the Federal Reserve left its forecasts basically unchanged from December. In her press conference following the central bank’s monetary policy decision, Yellen highlighted the fact that the central bank sees only a gradual pace of interest rate hikes.

Yellen set, what analyst say was a dovish tone, by saying at the start of her press conference that the rate hike did not signal a reassessment of the current economic outlook. She noted that the central bank has seen “solid progress,” made in the labor market.

“Gold is rising because investors feel more confident that that Fed is not going to increase rates rapidly this year,’ said Jeff Nichols, managing director at American Precious Metals Advisors and senior economic advisor at Rosland Capital LLC.

Nichols added that even with the three rate hikes priced in this year, real interest rates are still expected to be negative,” which is positive for the yellow metal in the long run.

In electronic markets, April gold futures last traded at $1,220 an ounce, up 1.45% on the day.

Nick Exarho, senior economist at CIBC World Markets, described the central bank move as a dovish hike as markets were expecting a more aggressive tone. The result has been a weaker U.S. dollar, which has helped boost gold prices.