Gold prices experienced a notable surge of over 1% on Wednesday, buoyed by a decline in the dollar and U.S. Treasury yields following the Federal Reserve’s interest-rate decision and Chair Powell’s subsequent speech.
As of 15:15 p.m. ET (1915 GMT), spot gold was up by 1.7% at $2,323.38 per ounce, rebounding from its earlier session low, which marked its lowest level since April 5. Meanwhile, U.S. gold futures settled 0.4% higher at $2,311.
The weakening of the dollar by 0.3% contributed to the rise in gold prices, as it made the precious metal more affordable for holders of other currencies. Additionally, benchmark U.S. 10-year bond yields saw a modest decline.
During its meeting, the U.S. Federal Reserve opted to keep interest rates unchanged and highlighted a “lack of further progress” towards its 2% inflation target. Fed Chair Jerome Powell indicated that the central bank’s focus remains on maintaining its current restrictive policy stance, suggesting that an interest rate hike is unlikely to be the next move.
Phillip Streible, chief market strategist at Blue Line Futures in Chicago, expressed his belief that the current economic environment resembles stagflation, predicting that the Fed will eventually resort to cutting interest rates. He emphasized the need for a new catalyst to propel gold prices back up to $2,400 and beyond, noting that the market could potentially revisit all-time highs under such circumstances.
Gold had previously reached a record high of $2,431.29 on April 12, driven by substantial purchases from central banks and increased demand from Chinese retail investors. Chris Gaffney, president of world markets at EverBank, attributed the recent upsurge in gold prices to heightened uncertainty surrounding the global economy, geopolitical tensions, and the forthcoming political elections, all of which have contributed to a favorable environment for the precious metal.
In economic news, data revealed that U.S. private payrolls exceeded expectations in April, indicating ongoing momentum in the labor market during the early stages of the second quarter.
In addition to gold, other precious metals also experienced gains. Spot silver rose by 2% to $26.81 per ounce, while platinum climbed by 2.5% to $956.75. Palladium saw a more modest increase of 0.1% to reach $954.50 per ounce.
Overall, the rise in gold prices amid a weakening dollar and lower Treasury yields following the Federal Reserve’s decision underscores the ongoing appeal of the precious metal as a safe-haven asset in times of economic uncertainty.
