FOMC left policy unchanged – Gold Is Rising

As anticipated the FOMC left its policy unchanged in the last meeting, which ended today July 31st. In the released statement, the FOMC stated it will maintain its current $85 billion a month of long term securities until the U.S labor market will show a substantial improvement:

“The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.” 

The FOMC statement remained very unclear and ambiguous as to when or under what conditions the Fed will scale down the FOMC’s assert purchase program or QE3:

“In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.”

This ambiguity may have contributed to the recent rally of gold and silver prices as it keeps the door open for the FOMC to maintain its QE3 program and perhaps not tapering it in 2013.

The recent estimate of GDP growth rate for the second quarter in the U.S came out and showed the U.S economy grew by 1.7% in the second quarter, which is better than many had expected. Will this news help the FOMC members decide on their next move regarding tapering QE3? Perhaps Friday’s release of the non-farm payroll report will also influence FOMC members regarding the outlook of the labor market. 

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