Gold futures ended regular trading with a loss, but ticked higher in activity Wednesday after the Federal Reserve delivered a half percentage point increase to its benchmark interest rate.
“The Fed has increased the interest rate by 50 basis points but the fact that this was already anticipated by the markets has calmed some nerves,” said Naeem Aslam, chief market analyst at AvaTrade, in a note.
“The dollar index has lost steam on the back of the Fed’s decision and this has helped the gold price which has been oversold as some were thinking that the Fed may increase the interest rate by 75 basis points.”
Gold closed ahead of the Fed announcement at $1,868.80 an ounce, down $1.80, or less than 0.1%. July silver
closed 27 cents lower, down 1.2%, at $22.40 an ounce.
“Gold prices are correcting (deeply) and near support of last resort for bullish views,” BofA Global strategists wrote in a Wednesday note, ahead of the decision.
The Fed raised the fed-funds rate by 50 basis points, or a half percentage point, while outlining its plan to begin shrinking its nearly $9 trillion balance sheet. The Fed typically moves its benchmark interest rates in quarter-point increments, with its last half-point hike coming in 2000.
“Post FOMC, if gold is above 1835 bullish ideas can be sustained,” the BofA Global team wrote. “If below 1835 then the risk of a double top from peaks at 2078 in August 2020 and March 2022 increases, and so would USD strength.”
Fed Chairman Jerome Powell began a news conference at 2:30 p.m.
The outsize move, and investor expectations for more of them in the future, comes as the Fed attempts to rein in inflation running at its hottest since the early 1980s.