Investors continue to speculate that the U.S. Federal Reserve will delay raising the interest rates of gold, causing a noticeable increase in its prices on Wednesday.
According to the Wall Street Journal, gold for December delivery crept to $1,148.70 a troy ounce on the Comex division of the New York Mercantile Exchange on Oct. 7.
Gold for December delivery is typically the most actively traded gold contract, yielding the highest rate of return for investors. The closing rate per troy ounce marked an impressive 0.2% increase from the previous day.
Many now believe that the Fed is unlikely to raise interest rates in coming months, despite widespread speculation earlier in the year that it could happen. Fed-funds futures, used by investors to place bets on central-bank policy, showed a 7% likelihood of a rate increase on Wednesday during a Federal Reserve policy meeting.
Despite the fervent trading of gold that typically happens at the end of the year, Fed-funds futures showed just a 36% chance that interest rates would raise in December, down from 44% last week.
“Any expectation that the U.S. Federal Reserve might raise interest rates this year has clearly been priced out,” analysts at Commerzbank said in a note to their clients.
The U.S. alone circulates or deposits over $7.6 trillion worth of gold, but they’re not the only country getting in on the action. The World Gold Council said that central banks around the world added 47 metric tons of gold to their reserves in August, following 62 tons that were added in July.
China and Russia were the most prominent buyers, as their central banks seek to diversify their portfolios away from the weakening dollar.
According to Mining.com, gold has seen a tremendous increase in value in the past decade. Wednesday marked the first time that gold was above the $1,150 resistance level since Sept. 24. It’s up 4% from where it was trading in 2006, before the Fed put a hold on interest rates.
Higher interest rates make gold look less attractive against interest-yielding assets like preferred stocks and bonds. Since the Fed has decided against raising interest rates, gold continues to be a strong buy for investors everywhere for the time being.
