Gold Tops $1,750 as Powell Sparks a Rally in the Yellow Metal
- Gold jumps 1.5% following Powell’s dovish remarks
- Investors concerned over inflation expectations
Gold Tops $1,750
Gold prices reached their highest level in two weeks following Federal Reserve Chairman Jerome Powell’s press conference at the end of the two-day FOMC meeting. On Wednesday afternoon, gold bugs piled onto the yellow metal. Consequently pushed its price from an intraday low of $1,723 to a high of $1,751, a gain of 1.59%.
Gold enjoyed a renewed buying momentum on Wednesday. However, it had been on a buying spree for the last ten days. On March 9, gold was trading near a 9-month low around the $1,680 mark. Since then, gold has climbed roughly 5% to its current market price. Early on Thursday, gold reached a new weekly top, breaking above $1,755. Price has subsided a bit now but remains above $1,750.
Gold prices reacted to the upside underpinned by the Fed’s dovish stance and its commitment to maintaining an ultra-loose monetary policy. The decision put pressure on the US dollar. As a result, the greenback extended its losses across the board, while gold was lifted.
Federal Reserve Maintains Its Supportive Role
The measures taken by the Fed include keeping its benchmark interest rate unchanged near zero and maintaining its bond purchase program. Inflation, which has been a concern for investors, is projected to land at 2.2% for the year. But then fall back to 2%, which is the Fed’s target for the next year. Since gold is often used as a hedge against inflation, the rush into the precious metal could be a result of the expected rise in prices.
In the medium-term, gold has been on the decline since August last year. That was when it climbed to an all-time high above $2,000 to reach a record of $2,074. Since then, the precious metal has depreciated by over 15%.
Adding to investors’ worries, Fed officials did not mention the recent rise in yields or any approach to tackle the yield surge. In reply to a question related to the recent move up in yields, Jerome Powell reiterated that the Fed’s current stance was appropriate. Therefore it will be maintained for the foreseeable future until a stronger economy scenario is in place.
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