Dubai: The US Federal Reserve’s decision to leave interest rates unchanged has triggered a rally in the price of gold, with retail rates in Dubai jumping by as much as Dh1.50 per gram in one day.
The Federal Open Market Committee (FOMC) announced on Wednesday night that it has decided to maintain the federal funds rate within the .25 per cent to .50 per cent range despite improving labour market and economic conditions in the United States.
As of 4:16pm, the price of 24-karat gold in Dubai went up from Dh160.75 to Dh162.25 per gram. Other gold pieces, including 22K, 21K and 18K inched up to Dh152.50, Dh145.50 and Dh124.75, respectively.
In Asian trade, spot gold rose 0.2 per cent to $1,341.60 an ounce on Thursday at 0715 GMT, according to Reuters. The precious metal reached as high as $1,342.18 per ounce, the highest since July 14.
Analysts were earlier betting on the bullion to drop based on speculations that the Fed’s latest minutes would reflect a more hawkish tone. The outcome of the FOMC meeting, however, reportedly spurred a bond buying spree, causing the bullion to soar.
Gold's latest rally may have something to do with the concerns raised about the world economy. Although the Fed made it clear that the American economy is indeed getting better, its statement has left room for speculation on the outcome of its next meeting.
"[The gold soared] because the Fed has indicated that the US remains concerned about the global economic outlook. Gold has once reacted to this decision and moved up," said Karim Merchant, managing director and CEO of Pure Gold Jewellers in Dubai.
Nevine Pollini, senior equity analyst at UBP, said gold has gained support from the US dollar, which weakened even after the Fed was clear about the the current economic state in the US.
"The FOMC statement acknowledged that the US economy is improving. However, it made no change in its forward-looking view on rates: they are supposed to remain low, with only gradual rises, and the decision being dependent on labour, inflation and international developments."
"Gold definitely liked this statement which does not pre-commit any decision for the next FOMC meeting. The door is left open, but the Fed remains cautious and is adopting a risk management strategy," Pollini told Gulf News.
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