FOMC Drives Gold Price Upward

Today was an incredibly big day for the price of gold, and for good reason. Today was the day of the meeting minutes from the FOMC meeting for the month of June. Today, we'll talk about the details that were released, why it helped to increase the price of gold, and what we can expect to see from the price of the commodity moving forward.

FOMC Meetings Ends With Another Rate Hike Delay

As mentioned above, today was a big day for gold as the day marked the end of the FOMC meeting for the month of June. So, what's the FOMC meeting? Well, the FOMC is known as the Federal Open Markets Committee. The committee is made up of several members, including 5 members from the Federal Reserve Bank.

During the monthly FOMC meeting, the parties discuss the state of the United States economy. Essentially, the meeting is designed to help the FOMC decide if the US economy is responding well to current monetary policies.

This meeting was an incredibly important one. You see, the Federal Reserve has been planning an interest rate hike. Until recently, it was expected that the Fed would increase its interest rate in June. However, recent economic data showed a major slowdown in jobs growth. This caused the Fed to delay the rate hike. Here's a statement from the meeting minutes that sums it up pretty well...

“The pace of improvement in the labor market has slowed... economic activity will expand at a moderate pace and labor market indicators will strengthen...”

What Does This Have To Do With The Price Of Gold?

While it may seem as though the FOMC meeting and the price of gold are two completely different topics, that's actually not at all the case. The truth is that gold is priced using the USD, and the FOMC essentially dictates what happens in the currency.

Because gold is priced using the USD, when the currency gains, the commodity becomes more expensive around the world thanks to currency exchange rates. Adversely, when the USD declines, the value of gold is supported by higher demand around the world thanks to lower global costs.

Because the Federal Reserve made the decision to keep low interest rates unchanged, we saw incredibly positive movement in the price of gold. After all, since the gold standard was left years ago, the value of the USD is largely dictated by its interest rate. A lower rate means a lower value, which helps to support growth in the price of gold.

What We Can Expect To See Moving Forward

Moving forward, I have an overwhelmingly bullish opinion of what we can expect to see from gold. The low interest rate from the Federal Reserve will help to support further price growth in the short term. However, that's not the only growth we're going to see. The truth is that economic data always causes reactions in the price of gold, and there's a big economic story happening right now. Soon, the British people will vote for or against a Brexit; with current polls showing that chances of it happening are high. This is likely to lead to more gains in the value of gold later this month. So, keep your eyes peeled!

[Image Courtesy of Wikimedia]