(Kitco News) –The gold market is not seeing much action with prices holding below $ 1, 500 an ounce as the Federal Reserve cuts interest rates for the third consecutive time, in line with market expectations.
In a widely anticipated move Wednesday, the U.S. central bank cut interest rates by 25 basis points, lowering the interest rate band to between 1. 50% and 1. 75%.
Gold prices were holding modest gains ahead of the central bank’s monetary policy decision and has seen little volatility in initial reaction to the announcement. December gold futures last traded at $ 1, 494. 30 an ounce, up 0. 24% on the day.
According to some market analysts, gold isn’t seeing much of a reaction following the latest monetary policy rate decision as it looks like the central bank could be pausing its easing measures.
“The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate,” the central bank said in a slight modification of current neutral stance.
Adam Button, managing director at Forexlive.com, said adjustment in the statement solidifies the central bank’s neutral view on monetary policy.
“Clearly, the Fed wanted to change it so they didn’t risk it being interpreted that another cut was coming. But they also didn’t want to take a cut off the table if it’s needed, ”he said. “The market is reading that as hawkish. That’s probably the right call.
Avery Shenfeld, senior economist at CIBC, said that the Federal Reserve has fully implemented its “insurance” easing policy with this third rate cut. He added that economic data will have to significantly deteriorate to prompt another rate cut by the end of the year.
“The quarter point move was widely expected, not because data had deteriorated since the September meeting, but because the tone of Fed language leaned towards cutting first and then watching the data, rather than taking a pause just yet, “He said. “With some signals of a pause now coming, markets might take this statement as reducing the odds for, or pushing back the timing of, any additional rate cuts.”
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