Gold prices rose to a two-week high Thursday, buoyed by the Federal Reserve’s decision to keep interest rates unchanged.
Gold for December delivery was recently up 1.1% at $1,349.10 a troy ounce on the Comex division of the New York Mercantile Exchange, hitting its highest level since July 14.
After its two-day policy meeting, the Fed elected not to raise interest rates, as economists had expected, though it said near-term risks to the economy have decreased. The optimistic statement leaves the door open for a rate increase as early as September, though officials offered no specifics on timing.
Daniel Briesemann, an analyst at Commerzbank, said the Fed’s decision to keep interest rates low drew in positive market players, boosting the price of gold.
”The opportunity cost for gold remains low,” he said. “It’s surprising that gold is not up further.”
The dovish Fed policy is a boon for gold, which as a non-interest-bearing asset fares well compared with yield-bearing assets when borrowing costs are low. The timing of future interest-rate increases will depend on the strength of economic data in the coming months.
”I think they’re going to wait a little longer to see what’s happening in Europe before they make a decision,” said Bernard Dahdah, a precious metals analyst at Natixis. “If it is catastrophic, I think they would probably take longer to raise rates.”
Mr. Briesemann and Mr. Dahdah both said they expect the next rate increase to occur in December.
The Bank of Japan will announce its monetary policy decision Friday, with economists expecting further easing. Looser monetary policy suggests further trouble in Japan’s economy and would prompt investors to look for havens like gold.
A weaker U.S. dollar also helped boost gold prices Thursday, as the dollar-denominated metal became cheaper to other currency holders. The WSJ Dollar Index was recently down 0.2% at 87.49.
