Gold experienced a jump in value on March 16 after the Federal Reserve announced a 25 basis point increase to its benchmark interest rate. The London fix price experienced a one-day jump of 2.55 percent from $1,198.80 (PM price) to $1,229.35 (PM price). This is a positive change in direction from a decline in prices that began on March 1. The rate hike of 25 basis points from 0.75 to 1 percent was seen by some as modest, but it clearly had a more than modest impact on the price of gold.
We’ve covered gold price spikes in the past, but this one is unique because of its connection to the Federal Reserve’s interest rate hike. Increases in interest rates are rarely a positive sign for gold prices due to opportunity costs associated with holding non-yielding bullion and gold’s tie to fluctuations in the dollar. Given the unique circumstances, it is likely that other factors impacting the price of gold beyond the most recent interest rate increase are also at play.
With the market anticipating two more hikes in the interest rate this year, we’ll be watching closely to see its impact on the gold market. If you want to be alerted to price swings during the Federal Reserve’s next announcement, don’t forget that you can use our mobile app to receive alerts via email or push notifications on your phone.