Gold fell and then stabilized on Wednesday afternoon as the Federal Reserve released a policy statement upholding its plans to keep interest rates near zero for a “considerable time” (read the full statement here). Around 2:53 p.m. EDT, gold for December delivery fell by $3.90 to $1,232.80 an ounce on the Comex. It finished the session at $1,235.90, which ended a half hour ahead of the Fed statement. The U.S. dollar rose after the statement, the euro fell, and the stock market rallied. In addition, gold bugs overseas are facing uncertainty over a possible vote in favor of Scottish independence from the United Kingdom and the economic implications this may have in the region.
Federal Reserve Statement: Interest Rates to Remain Low for “Considerable Time”
Again at this month’s Fed meeting, all eyes were on interest rates. As Kitco News explains, “Much of the focus going into the meeting was on whether policy-makers would retain language saying the federal funds rate would remain low for a ‘considerable time’ after QE ends. Some economists had thought the Fed might remove this phrase, although these ideas were cooled when Wall Street Journal Jon Hilsenrath suggested Tuesday that the Fed might keep this language, not wanting to scare markets into thinking a rise in rates is imminent.” Despite this dovish outlook on Wall Street, gold investors still acted as though an earlier rise in interest rates is inevitable. Popular opinion holds that higher interest rates put downward pressure on gold, although history has shown otherwise.
Scots Buying Up Gold Ahead of Independence Vote
As Scotland votes on possibly declaring independence from the United Kingdom, some Scots have been stacking up on gold seeking financial security. Data from the UK gold trading firm Bullion Vault shows a 40% increase in Scottish residents who have purchased gold since the start of September compared to the same period last year. Even though voting has begun, there is no agreement on what currency Scotland would use if an independence vote passed, and experts have been warning of major short-term economic disruptions. There may also be debate over how to divide the UK’s shared gold reserves if Scotland becomes its own independent nation. If the vote passes, the official split will not be official until March 2016.
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