fed inaction

Gold Prices Steady After Fed Inaction on Prime Rate

Global investors were wary earlier this week that the meeting of the Federal Reserve would result in an increase in the prime rate for the United States. Typically, such an action would improve the dollar’s performance by strengthening its value against inflation. As gold investment traditionally runs in inverse trends compared to the strength of the dollar, investors were bracing for a potential dip in gold prices.

It turns out those concerns were unfounded, as the Federal Reserve has decided, yet again, to not raise the prime rate. At the opening of the domestic market on Thursday, Feb. 23, 2017, gold futures were trading for $1,237 per ounce.

Fed Inaction Likely Temporary

One of the biggest takeaways from Wednesday’s meeting of the Federal Reserve was the idea of broad and strong support for an increase in the prime rate. While the Fed’s inaction means rates stay the same for the next few weeks, that could change in the very near future. The markets, which are currently strong and favoring investments like gold, could change substantially if one or more additional rate hikes are implemented in 2017. For now, however, Federal inaction has helped gold maintain a strong selling price comfortably over $1,200 per ounce. Analysts are still predicting growth potential, too.

It’s hard to say exactly what will happen with gold prices in the upcoming months. Market analysts often miss key factors. The market is also impacted by unexpected events, such as international snafus and natural disasters. It’s likely that an increase in the prime rate would impact gold prices, but whether the impact of that decision would be short-term or longer-term losses in price is harder to predict. What is simple to predict is that some people, who buy and sell gold futures, will profit off the fluctuations and changes in gold’s price in the upcoming months.

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