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Gold, Silver Prices Up on Policy Shift

Gold futures rose in Commodities on early Friday. This was after the Federal Reserve announced its policy shift allowing employment and to have inflation run hotter than before.

This implied that the central bank may keep benchmark interest rates lower for longer.

The Fed is shifting to a policy of average inflation. Its target would effectively see policymakers end the practice of preemptively hiking interest rates to stave off inflation.

It would instead allow inflation to run above its 2% target to make up for periods when inflation runs below this point. This signals that a long period of ultra-low interest rates lies ahead.

After volatile trading on Thursday, which briefly sent bullion surging higher immediately after the announcement, gold ended sharply lower. Investors attributed that decline to investors’ profit-taking and attempting to interpret the implications of the historic move by the Fed. This was according to some precious metals enthusiasts.

Han Tan, a market analyst at FXTM, wrote that gold prices were sent on a roller-coaster ride last night. Investors tried to decipher what the Fed’s shifting stance on inflation could mean for the yellow metal.

Prices were soaring above $1970 before careening below $1910 in the immediate aftermath, Tan added in a research note.

 

The Gold in Relation to the Dollar

Moreover, commodity news reports that gold also drew some support on Friday from a weakening U.S. dollar. The currency fell on the back of the strength in the Japanese yen.

This was on the back of news that Prime Minister Shinzo Abe plans to quit his position due to his worsening health.

The benchmark Nikkei 225 NIK, -1.40%, closed down 1.4%. The yen USDJPY, -0.81%, strengthened to change hands at 105.25, surging by more than 1.2%.

A broader measure of the dollar against a half-dozen currencies, including the yen, was down 0.8%. This was gauged by the ICE Dollar Index DXY, -0.61%.

On a relative basis, a weaker dollar can make precious metals that are priced in the currency more appealing.

December gold GCZ20, 1.66% GC00, 1.66% traded $35.30, or 1.8%, at $1,967.90 an ounce. This was after falling by 1% on Thursday.

September silver SIU20, 2.04%, meanwhile, added 69 cents, or 2.5%, to reach $27.71. This followed its 1.5% decline in the previous session.

The most-active December contract SIZ20, 1.96%, rose 67 cents, or 2.5%, at $27.870 an ounce.



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