Daily Gold Update

Source:Dana Samuelson, American Gold Exchange

AustinAs markets widely anticipated, the Fed raised short-term interest rates today 0.25% to a range of 1.25% to 1.50% and reiterated their forecast of three 0.25% rate hikes in 2018. The vote to raise rates today was 7 to 2. The Fed also confirmed that monthly roll-offs from the central bank balance sheet would step up, as scheduled, to $20 billion from $10 billion in January.

The Fed was upbeat about recent economic activity saying the labor market has "continued to strengthen and that economic activity has been rising at a solid rate." Confirming this view, the Fed raised its GDP forecast for 2018 from 2.1% to 2.5% and an unemployment rate decline from the current 4.1% to 3.9% by the end of 2018. Despite this economic strengthening, the Fed conceded that inflation continued to run below their 2% target. Economists said the Fed is lifting rates, despite low inflation, out of concern persistently easy financial conditions could lead to asset bubbles.

This morning prior to the Fed's announcement, gold and silver firmed up in New York trading as the dollar eased against other currencies on the U.S. dollar index. Last night's election of Democrat Doug Jones over Republican Roy Moore in Alabama tightened the Republican Senate majority to 51-49 in the Senate raising concerns over the ability of the Senate to pass major legislation in the New Year. Then the November CPI inflation report showed a slowing of core consumer price growth, excluding volatile food and energy, contributing to U.S. dollar weakness in early morning trading. Analysts had expected monthly CPI inflation to come in at 0.2% instead of the 0.1% reported.

Gold and silver gained further in the electronic trading session as the dollar declined further in afternoon trading following the Fed's rate hike announcement. While the Fed held steady on their anticipation of three 2018 rate hikes, markets disagreed. U.S. 10-year treasury yields declined throughout the day from 2.42% to 2.34%. All in all, the dollar fell from a morning high of 94.07 to as low as 93.45 on the U.S. dollar index before settling at 93.47. Conversely, gold which was trading around $1,243 early this morning finished the day at over $1,256 for a 1.27% gain. Silver punched higher as well, moving from a $15.65 low to over $16.00, finishing the electronic session at $16.04.

At the Comex close: February gold gained $6.90 to $1,248.60; March silver gained 20 cents to $15.87; January platinum fell $0.30 to $875.40; March palladium added $1.70, to $1,004.05 an ounce.