The Fed noted the lack of further progress on inflation, but kept the language referring to a future reduction of interest rates, suggesting that the easing bias remains in place, according to the Federal Open Market Committee statement Wednesday at the conclusion of a two-day meeting in Washington.
“We’ve stated that we do not expect that it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%,” Chair Jerome Powell said during a press conference after the FOMC statement. He also said that “it’s unlikely that the next policy rate move will be a hike.”
Treasury yields pushed lower as the Fed agreed to slow the reduction in its bond portfolio, while swap traders have amped up their bets on policy easing in 2024. Bullion rose as much as 1.8% before paring some of the gains.
“There was an absence of implicit tightness talk in the communique. This is convincing gold traders that a few rate cuts are possible,” said Bart Melek, global head of commodity strategy at TD Securities. Investors also seek safety in bullion as a hedge against still-high inflation, according to Melek.
Lower rates are typically positive for gold as it pays no interest.
Gold has climbed about 12% this year, hitting a record last month, despite the timeline for Fed cuts being pushed back. The precious metal’s ascent over the past two months has been linked to central-bank purchases, robust demand from Asian markets — especially China — and elevated geopolitical tension from Ukraine to the Middle East.
Bullion rose 1.3% to $2,314.99 an ounce as of 3:54 p.m. in New York. Silver also climbed. The Bloomberg Dollar Spot Index was down 0.2%.
Palladium prices briefly dropped below platinum for the first time since February, as the precious metal’s long-standing premium is eroded by a pessimistic outlook for demand in gasoline-powered cars. Platinum gained as much as 2.3%.
(By Yvonne Yue Li)
