Daily Gold Update

Source: Bill Musgrave, American Gold Exchange

Austin— After falling 0.3% to close the regular session at $1,178, gold rallied strongly to $1,188 in electronic trade following the Fed's suggestion that the pace of interest rate increases may be slower than previously thought.

In its post-meeting policy statement, the FOMC said today that while the economy "has been expanding moderately" since the April and the labor markets are showing signs of improvement, business investment and exports are weak and inflation remains "below the Committee�s longer-run objective."

In her press conference after the release, Fed Chair Janet Yellen refused to be pinned down to a date for the first hike, saying that the decision will be data-dependent and not "mechanical." She added, though, that rates will remain low even after employment and inflation have returned to "normal" levels.

While few analysts expected a rate increase at this meeting, many believed the Fed would send signals about the first one coming in September. Today's statement gave no indications of settled timing, however, saying instead that the first hike will come only after "further improvement in the labor market" and evidence that "inflation will move back to its 2% objective over the medium term."

Futures traders continue to see no hikes until the end of the year, with 66% betting on December, according to CME FedWatch, and 49% on October. Rising rates are expected to pressure equity and commodity markets by decreasing liquidity and increasing the relative strength of the dollar.

U.S. and global equities picked up after the Fed statement, with the Dow and Global Dow both rising around 0.4%. The dollar fell back, supporting gold and other commodities denominated in it for international trade. Treasury yields plummeted on expectations that rates will rise more slowly.

The other precious metals were mixed on the day and mostly higher after the policy statement. Silver added 0.2% and then jumped another 1% after hours. Platinum dropped 0.5% before rebounding to a slight gain after the Fed release. Palladium held with a loss on 0.3%.

At the Comex close: August gold slipped $2.90 to $1,178; July silver added 3 cents to $15.99; July platinum dropped $4.90 to $1,074.90; and September palladium lost $2.40 to $730.40 an ounce.