The yellow metal is bullish by over $32 at the start of the London trading session today, despite the U.S. Federal Reserve increasing interest rates in its latest effort to curb inflation. The Fed highlighted inflation as a risk to the economy while also ruling out larger hikes for the rest of 2022.
The surge in the price of Gold came unexpected, especially after the U.S. Fed increased its interest rate as it handed down its policy decision. The increase in the interest rate should have brought a strong dollar index (a measure of the strength of the U.S. dollar), however, we saw a decline, which suggests that the increase of the interest rate has already been priced into risky assets like Gold.
Gold futures is up over 1.76%, currently trading $1,901.67 an ounce, after gaining 1% earlier in the session. The dollar, which normally moves inversely to gold, is down, as it is trading near the one-month low it hit during the previous session.
What you should know
- The Fed hiked its interest rate to 1%, the largest increase since 2000, as it handed down its policy decision on Wednesday.
- Fed Chairman, Jerome Powell said the 75-basis points super-hike feared by investors is “not something that the committee is actively considering,” adding that policymakers view the “neutral” level of the fed funds rate to be 2% to 3%.
- Powell also appealed to Americans struggling with high inflation to be patient while policymakers take the hard measures to bring it under control.
- He also said the Fed has ruled out, for now, a rate hike of three-quarters of a percentage point at the central bank’s upcoming monetary policy meetings.
- Gold, which is often perceived as a hedge against rising costs, jumped 1% in the previous session on Powell’s statement. U.S. Treasury yields also fell sharply on Wednesday, boosting the yellow metal.
Across the Atlantic, the Bank of England will hand down its policy decision later in the day. Elsewhere, China’s Caixin services purchasing managers index was 36.2 in April 2022.
In other precious metals, silver is up 2.73%, currently trading $23.01 an ounce. Platinum is marginally down by 0.17%, currently trading $980.80 an ounce. Palladium is up 0.29%, currently trading $2,258.52 an ounce, as of the time of this writing.
