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Updated 17:20 18/09/19

Gold price spikes ahead of Fed meeting

By Duncan Richardson, News Editor

17 Sep 2015

The gold price surged over 2% yesterday, following negative inflation data which makes a fed interest rate rise today unlikely. The gold price rose over $20 per ounce to break through the $1,100 per ounce barrier.

Consumer price inflation turned negative for the first time since January 2014 dampening expectations of a rate rise. Typically the gold price declines when interest rates rise as the opportunity cost of holding gold increases as the metal provides no yield. Higher rates also boost the U.S dollar which also tends to put downward pressure on the gold price.

Market data indicates that traders have priced in a 30% chance of an interest rate rise.

Many believe the U.S. economy will be unable to absorb an increase in borrowing. After years of talking if the Fed fails to rise rates in the near term they run the risk of losing credibility.

The Fed will release its decision at 18:00 GMT.

Silver rose +3.9% to $14.89 per ounce, platinum fell -0.89% and palladium retreated by -0.56%.

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