What should the Fed’s inaction mean for commodities?

Commodity markets initially welcomed the US central bank’s decision to keep rates on hold yesterday, but the moves have been small. This makes sense, as rates are still likely to rise soon, and the delay could simply prolong the uncertainty. Worse still, the Fed’s hesitancy may yet reinforce investors’ worries about the health of the global economy, rather than reassure them, leaving gold as one of the few lasting beneficiaries. Nonetheless, our view remains that better news from China will more than offset the gradual return of US interest rates towards more normal (but still low) levels.