The gold spot price plummeted from its $1,200 per ounce perch Thursday morning, after the Federal Open Market Committee (FOMC) announced that it would hold off on an interest rate hike until the U.S. economy, which has been “noticeably more downbeat,” improved. As of 10am EST, the gold spot price had fallen $19.20 to $1,186.20 per ounce.
The Federal Reserve’s advisory committee voted to keep the prime lending rate at 0.25% because of the U.S. economy’s sluggish first quarter performance. The U.S. Dollar Index is near a three-month low, and the FOMC also blamed the weak economy on:
- a harsh winter
- a port strike in California
- weaker-than-expected job creation
- a rapid decline in the price of crude oil
Although the U.S. economy practically ground to a halt during the last three months (the official GDP rose 0.2% during the first quarter of 2015, compared with a 2.1% increase during the last three months of 2014), Federal Reserve officials have maintained that the slowdown is “transitory.” Spring is here, and the strike in California is over, so what’s next for the U.S. economy?
We’ll know more this week, as the employment cost index, the ISM Chicago business survey, the personal income index and the weekly jobless claims report are all due to be released.
With the economy showing so many mixed signals, the Federal Reserve would like to keep its options regarding interest rates open. There has even been talk that an interest rate hike might not happen until September; prior to today, many analysts were expecting the Fed to raise interest rates as early as June.
The Fed only has so much flexibility at this point, though, because both job gains and household spending fell between the FOMC’s March and April meetings. No matter how long the Fed would prefer to wait to raise interest rates, the U.S. central bank’s “free money” experiment is running out of time to show sustainable, positive results.
For regular updates on the Federal Reserve’s manipulation of interest rates, and to learn more about how such manipulation could affect future gold prices, grab your free gold investing guide below or call (800) 300-0715 now to speak with a non-commissioned gold investment expert at “America’s Trusted Source For Gold.”