FEDs meeting outcomes: impact on the gold market and the Citigroups forecast
Another FED meeting took place on July, 27th. The result is already known as the interest rates did not change. How does this influence the gold market?
From the very beginning, FED has played a crucial role in the financial market; and because of that, the analysts in Citigroup changed their opinion about gold abruptly.
Read the details!
On the evening of July 27th, the results of the latest US Federal Reserve's meeting were unveiled: the interest rates were not to be changed.
The key role of the FED in the gold market
The decisions that this independent banking structure take do not only influence the US economy, but also the global financial market. FED is responsible for interest rates, the demand for the state reserves, or for the operations of the open market. This is why before, during and after any FED meeting, there are considerable fluctuations in the gold price.
The following chart shows the changes of interest rates from 1982-2008.
As read in the chart, the last time rates were risen before 2008 was in 2006. After that, they were only risen once by Janet Yellen, the current Chair of the Federal Reserve, by 0,25%-0,50% in December 2015. Nevertheless, the overall trend is downward.
The situation impacts gold prices positively: it is not profitable for investors to invest in other assets than gold. At this point, gold prices start growing and the profits of future sales increasing.
What was expected from the meeting on July 27th?
Following the polls, 50% of the respondents expected the rates to be risen by December 2016. Others spoke about this increment happening already by July 2016, or in other words, right after the actual meeting. The results are known already, which means that the course of gold prices will be clearer soon.
An expert opinion from Citigroup
According to Willem Buiter, head economist of the company “Citigroup”, gold is a good asset to save money with. Interestingly enough, the expert is known as ardently opposing the idea of buying gold, but now he seems to have changed his opinion.
Buiter believes that gold now is a competitor of the dollar, euro, yen and other currencies. As already mentioned, the most influential factor here is the interest rates. The expert also affirms that gold has been a product highly valued by people for nearly 6000 years now.
It is the time to take advantage of the current economic circumstances for personal benefit and start earning with gold. Read more articles about the gold business on our portal and share them with your contacts!
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