News Header

 

Fed to Provide Interest Rate Expectations

Release Date: 
Wednesday, January 25, 2012

Gold eased as the euro fell ahead of a policy statement from the Fed, with the metal trading at $1654.10 per ounce at 6:42 a.m. Pacific Time on the New York Spot Market with silver at $31.79 per ounce. European finance ministers and Greece's private creditors have not yet agreed to debt restructuring terms, weighing on the region's common currency.

The Federal Open Markets Committee policy statement today for the first time allows the voting members of the committee to individually express their interest-rate outlooks. According to James Steel, metals analyst at HSBC Securities, a majority of the Fed members are expected to choose 2014 as the first year for a rate increase. "Low interest rates are theoretically supportive of gold prices, but this may already be largely factored into current gold prices," he said.

"It's all about the dollar," said Nick Trevethan, an analyst at Australia & New Zealand Banking Group Ltd. "This is the first time the Federal Open Market Committee is giving its forecast, and I think people are keen to see what it looks like." The Fed kept rates at historically low levels last month and stated that economic conditions may warrant "exceptionally low" rates "at least" through mid-2013.

According to Nic Brown, head of commodities research at Natixis, "despite all the crisis engulfing Europe last year, it is a U.S. fiscal mini-crisis over the budget ceiling that virtually gave the biggest boost to gold prices. So if you're looking for potential upside in gold and other precious metals this year, you probably need to look to the U.S."

HSBC's Jim Steel discussed Asian markets as well, noting that "China and Vietnam are essentially out of the physical markets due to the Lunar New Year celebrations. If gold can hold steady with one of its major physical markets essentially on holiday, then we would regard that as an indication of underlying strength."

(Sources: "Gold prices edge up, capped by dollar gains," MarketWatch, January 25, 2011; "Gold Retreats for a Second Day as Asian Holidays Erode Physical Demand," Bloomberg, January 25, 2012; "PRECIOUS-Gold falls for a second day ahead of Fed," Reuters, January 25, 2012)

News Footer

 

†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

You should review Goldine's Account Agreement along with our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider ®, prior to making your purchase. Goldline has a spread or price difference between our selling price, called the "ask", and our buy-back price, called the "bid". That spread varies depending on coin or bar you acquire. Spreads on 1 oz bullion coins, 90% silver dimes and quarters, and one ounce and larger bullion bars are 13%. All other coins have a spread of 28%. There is also a 1% liquidation fee when you sell your coins back to Goldline. The market must go up enough to overcome this spread before an actual profit is achieved. Precious metals and rare coins can increase or decrease in value. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average investment portfolio though others may recommend a different percentage.

To receive free information package on gold and precious metals investing, call Goldline at 1-800-963-9798.