The origin of gold has long puzzled scientists around the globe. (Photo : Reuters)
The Federal Reserve's decision to keep the U.S. interest rate as it is shook investors' outlook on the global economy and worked in favor of equity markets in developed nations. As a result, gold ended its 3-week losing streak on Friday as the spot gold XAU= prices rose 0.5 percent to $1,137.34 an ounce.
The yellow metal finished the week up 2.7 percent, the highest level since the safe haven reached $1,141.50 on Sept. 2, reports Reuters.
The Fed kept the key lending rate on Thursday over worries about the global economy, volatility of the financial market and slower inflation in the U.S. The Fed seems to have lost a little confidence in the rate hike cycles, points out Matthew Turner, analyst of Macquarie.
However, Turner believes an interest rate hike is still possible in December, which warrants capping of gold price rallies. A Reuters survey on Thursday, after the Fed issued its decision, agree with Turner's forecast that an interest rate increase is likely in December.
But Jeffrey Lacke, president of the Federal Bank of Richmond, warned on Thursday of the adverse outcome of the Fed decision. In a statement on Saturday, Lacke said, "An increase in our interest rate target is needed, given current economic conditions and the medium-term outlook," reports Bloomberg. He was in favor of a quarter percentage point hike.
Despite the improvement, the longer-term outlook for gold is bearish, said Carsten Menke, analyst of Julius Baer, in a note to clients, because of the metal's dependence on gold movements and investment demand.
