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Gold Sees Gains Disappear as Fed Raises Interest Rates

Madeleine Johnson

On Wednesday, the Federal Reserve approved its second rate hike of the year, raising interest rates by 25 basis points. It was an expected move by the policymaking Federal Open Market Committee, and the new range will be 1% to 1.25%; the current rate is 0.91%.

As a result, U.S. gold futures took a bit of a hit, and as of 3:55 PM EST, prices were down 0.73% to $1,259.30 an ounce. Earlier, futures traded only 0.07% lower, near $1,268.60 an ounce, when Fed chairwoman Janet Yellen spoke, notes CNBC.

When interest rates rise, gold is negatively affected, since a rise in rates make investments with more yield, or income return, more appealing. Gold doesn’t offer a yield.

Looking at gold-focused ETFs, the SPDR Gold Shares GLD closed the day down 0.55%, while the VanEck Vectors Gold Miners ETF GDX was down 3.18%.

Gold was actually trading higher earlier today, up over 1% after two soft economic reports were released. One covered weakening consumer prices, and the other described a major drop in retail spending; U.S. retailers in May reported the biggest decline in sales in 16 months, with sales down 0.3%.

Silver, however, remained strong, and the metal is up around 0.60% to $16.87 an ounce as of 3:55 PM EST, with the iShares Silver Trust SLV up 0.19% in after-hours trading.

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SPDR-GOLD TRUST (GLD): ETF Research Reports
VANECK-GOLD MNR (GDX): ETF Research Reports
ISHARS-SLVR TR (SLV): ETF Research Reports
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