Wednesday, 15 March 2017 16:26

The Federal Open Market Committe (FOMC), at its March 15, 2017 meeting, made the decision to raise the federal funds target interest rate by 25 basis points. The Fed's statement after the meeting and Fed Chair Yellen at her press conference forecasted a continued gradual rise in interest rates, with the expectation of a total of three rate increase in each of the next three years. The Fed indicated the belief that the U.S. economy as  measured by employment is on track to continue gradually improving.

Markets quickly reacted to the news, with the three major U.S. equity indices jumping after the Fed's statement. Precious metals also reacted swiftly with gold, as it often does, leading the way. Gold rose $21 to $1221, an increase of 1.7% on the day. After several days at or just under $1200, this is a positive sign for buyers of the yellow metal. As economic activity and employment improve, prices will increase leading to increased inflation. If the U.S. government actually enacts long talked about legislation to reduce taxes on individuals and businesses, and increase spending on defense and infrastructure, inflation is even more likely to accelerate. This is a positive scenario for precious metals. 


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