Prices turn higher after Fed rate decision and statement

SAN FRANCISCO (MarketWatch) — Gold futures on Tuesday tallied a loss of more than $36 an ounce during a three-session losing streak that brought prices to their lowest level since mid June.

The metal followed a decline in oil prices and saw pressure from U.S. dollar strength, which eased demand for the precious metal.
But gold prices moved higher in electronic trading on Globex after the U.S. Federal Reserve kept interest rates unchanged at 2% and gave no sign that it plans to change policy in the foreseeable future.

The Fed made its announcement after regular trading on the New York Mercantile Exchange closed.
Gold for December delivery finished Tuesday at $886.10 an ounce on Nymex, down $21.80, or 2.4%. It’s down $36.60, or 4%, from the close of $922.70 on July 31.
The contract last traded at $888.40 on Globex as of 2:30 p.m. EDT.
“The Fed meeting does nothing to alleviate the continuing exodus from commodities even though the central bank held its cards very close to the vest,” said Jon Nadler, a senior analyst at Kitco Bullion Dealers. “September’s meeting, however, might be quite a bit different in both tone as well as results.”

Then again, the Fed statement “indicates it is returning to monetary wimp mode,” said Ned Schmidt, editor of the Value View Gold Report. The Federal Open Market Committee “is not going to raise rates till inflation or dollar depreciation reaches massive proportion.”
So the “dollar will return to [a] bear market, and gold will make a new high by October,” said Schmidt, in emailed comments.

http://www.marketwatch.com/news/story/metals-stocks-gold-futures-close/story.aspx?guid=%7B3EF27CC1%2D7918%2D4BA5%2DABC7%2D3FD121D4FD02%7D&dist=hplatest

Dollar’s toll on gold

For now, “the dollar has and continues to be the main influence on the gold price, so when today it pushed back to the upper limit of its trading range, it influenced the gold price to the downside again,” said Julian Phillips, an analyst at GoldForecaster.com, ahead of the Fed announcement.
“The factors pushing the price down are not in … substantive enough to change the trend of the gold price,” he said in emailed comments. “Only a sound dollar, healthy global economic growth, low inflation, confidence in the world monetary system will change this trend, but then this is the sort of thing dreams are made of.”

IMO

I seriously doubt other countries will lower their interest rates mainly because inflation is at all time highs globally. Inflation is a monster and lowering rates only feeds it. Raising rates will cause further damage to the credit and housing crisis which has, is and will continue to be an issue for quite a while. The dollar will go below .60 and gold will go over $1,500.

If you’ll notice, every time the Fed speaks or the President speaks the dollar experiences a temporary rally.

A few days pass and the dollar resumes it’s downward spiral. They have teams of people trying to prop the dollar up and the best they can do is hold it up for a few days at most. Banks will continue to fail and Bernanke will continue to bail them out by printing however many dollars it takes. That alone spells major problems for the dollar and will cause gold to rise higher.

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