The Federal Reserve continues its tightening trend. However, gold prices remain high below $2,000. This shows that the hawkish stance of the Fed and Jerome Powell is not enough to worry the gold market.
Fed, Powell, Israel-Hamas war and gold prices…
cryptokoin.comAs you follow from , the Federal Reserve left interest rates unchanged following its monetary policy meeting on Wednesday. However, Chairman Jerome Powell said it was still unclear whether the committee was done raising interest rates. Powell: “Is monetary policy restrictive enough to reduce inflation to 2%? “That’s the question we ask ourselves,” he said. After this, Powell said that they would re-evaluate the decisions at each meeting.
Powell’s confirmation of the Fed’s tightening trend caused gold prices to briefly fall to a five-day low. However, the precious metal quickly recovered. Thus, gold prices continue to find support above their 200-day moving average. Edward Moya, senior market analyst at OANDA, says that while the Fed remains hawkish, it is not hawkish enough to spook markets. In this context, Moya makes the following comment:
The Fed did not rule out a rate hike in the coming months. However, swap contracts showed that traders were not convinced. The Fed tried to maintain a hawkish stance. However, Wall Street does not believe there will be additional tightening this cycle. Easing fears of Israel’s war spreading beyond Gaza could have a bigger impact on gold than the Fed’s monetary policy. Meanwhile, the US Treasury Department’s lower-than-expected funding requirement also lowered the temperature in the gold market. Budget deficit concerns have been a bigger driver for gold than higher yields.
Light pigeon Powell remained in ‘wait and see’ mode!
The Fed has stated that it will maintain a restrictive monetary policy for the foreseeable future. However, Powell said the risks of doing too much versus too little are becoming more balanced. On the other hand, he added that the committee continues to focus on reducing inflation to the 2% target.
Regarding the risks to the economy, Powell made a brief comment and stated that the possibility of a government shutdown was a risk. Meanwhile, Israel’s war with Hamas is causing a terrible ‘humanitarian crisis’. On the other hand, oil prices are more or less under control. So it looks like it will have a limited impact on the US economy. Gold prices are caught between two-way winds. Andrew Hunter, chief U.S. economist at Capital Economics, calls Powell’s latest comments slightly dovish. He explains his views on this subject as follows:
The Fed showed it remains in a ‘wait and see’ mode today by leaving interest rates unchanged and continuing to signal the possibility of further tightening. We think that the possibility of a final increase will continue to decrease as the data to be announced in the coming weeks indicates that the Fed will start reducing interest rates again in the first half of next year.
The expected happened, the markets remained indecisive!
Since the Fed’s interest rate decision was in line with expectations, it did not have a serious impact on gold prices. In addition, Fed Chairman Jerome Powell also spoke in a tone between hawk and dovish. So markets remained directionless, lacking a clear message. Adam Button, head of foreign exchange strategy at Forexlive.com, notes that the changes in the November announcement do not offer any new insight compared to those released last month. “There were some concerns about larger changes,” Button said. But that was pretty much what was expected,” he says.
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