MTECHTIPS;-Gold dips after dollar rebounds on Fed rate hike

MTECHTIPS;-Gold dips after dollar rebounds on Fed rate hike

MTECHTIPS-Gold prices came under pressure on Wednesday, after the Federal Reserve raised interest rates for the second time this year and maintained its outlook of three total rate hikes for this year. The Federal Reserve increased its key interest rate by 0.25% to a 1.00%-1.25% range on Wednesday, and surprise investors as it maintained its outlook of three total rate hikes for 2017, despite the recent dip in job creation and inflation. The central bank said it expects that a tightening labour market will lift inflation to the 2% target over the medium term. Fed chair Janet Yellen echoed these remarks in a press conference following the rate decision. “Employment is near its maximum level and the committee expects inflation to move and stabilise around 2% over the next couple of years” Yellen said. The bullish comments on inflation and additional rate hikes lifted the Dollar into positive territory against a basket of global currencies, pushing the precious metal to session lows. Gold futures for August delivery on the Comex division of the New York Mercantile Exchange fell $8.64 or 0.68%, to $1,259.53 a troy ounce. Gold is sensitive to moves higher in both U.S. rates and the dollar – A stronger dollar makes gold more expensive for holders of foreign currency while a rise in U.S. rates, lift the opportunity cost of holding non-yielding assets such as bullion.
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