Gold rises to six-week high as dollar drops after Fed statement

Gold rises to six-week high as dollar drops after Fed statement

In a widely expected move, the Federal Reserve kept interest rates unchanged on Wednesday. The central bank has a 2 per cent target for this measure of inflation.

Federal Reserve officials said they would begin running off their $4.5 trillion balance sheet "relatively soon" and left their benchmark policy rate unchanged as they assess progress toward their inflation goal.

At the last meeting in June, the Fed had said balance sheet normalization would start "this year", having first flagged the action back in March.

'Previously they had been unspecific in relation to the timeframe when this would occur, but they also indicated that they would change the language around the inflation outlook which is significant.

The broader rush for risk was still intact though, coming after the Fed left USA rates unmoved as expected but tweaked its wording on inflation.

As broadly expected by investors, the Fed maintained its benchmark lending rate and said it was continuing the slow path of monetary tightening.

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The dollar eased again Thursday and major Asian markets gained after the Federal Reserve gave a tepid inflation outlook, fuelling speculation it will hold off on further USA rate hikes this year.

Futures markets pointed to further modest gains when trading resumes in NY later though Twitter caused a flutter as weaker-than-expected growth in monthly active users sent its shares down 8% in premarket trading.

United States stocks finished mostly higher on Wednesday, as the Federal Reserve concluded its two-day policy meeting in Washington by leaving interest rates unchanged. The Fed had described inflation as being "somewhat" below target in its policy statement in June, but on Wednesday it simply stated that it was below 2 percent.

The Dow Jones Industrial Average rose 97.07 points, or 0.45 percent, to 21,710.5, the S&P 500 gained 1.92 points, or 0.08pc, to 2,479.05 and the Nasdaq Composite added 7.11 points, or 0.11 percent, to 6,419.29.

Against the Japanese yen, the dollar was also little changed at 111.80 yen. "Political risk and the USA debt ceiling debate are likely to intensify over the next two months". The vote was unanimous among the Fed's Board of Governors and will keep the rate between 1 and 1.25 percent. The index touched a 1-year low of 93.86 on Friday and has depreciated by close to 8 percent this year. Brent crude, the global standard, rose 14 cents to $51.24 per barrel.

Gold and silver have seen substantial recoveries in their prices over the past week, rising 1.7% and 2.1%, respectively, on a trailing-five-day basis.

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