Gold price holding its ground as the Federal Reserve raises interest rates by 75 bass points

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(Kitco News) – Gold is under modest buying pressure even as the Federal Reserve expects to continue tightening monetary policy this year as it acknowledges slowing economic dynamics.

As expected, the Federal Reserve raised interest rates by 75 basis points. However, some analysts say markets have looked beyond today’s decision and are focusing on the central bank’s forward guidance.

In its monetary policy statement, the central bank said it “anticipates continued increases in the target range will be appropriate”.

The gold market holds up after the final decision. August gold futures last traded at $1,720.80 an ounce, up 0.18% on the day.

While the Federal Reserve plans to further tighten interest rates, it noted that economic activity is slowing. However, inflation remains the committee’s top priority.

“Recent indicators of spending and production have softened. Nevertheless, job growth has been robust in recent months and unemployment has remained low. Inflation remains high, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices and broader price pressures,” the statement said. “Russia’s war against Ukraine is causing enormous human and economic problems. The war and related events are putting additional upward pressure on inflation and weighing on global economic activity. The Committee is very alert to inflation risks.”

The central bank also left some room for an easing of its stance if the economy continues to weaken.

“The Committee stands ready to adjust the stance of monetary policy if necessary if risks arise that could hinder the achievement of the Committee’s objectives. The commission’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflationary pressures and expectations, and financial and international developments,” the statement said.

Avery Shenfeld, senior economist at CIBC, said the statement reflects the Fed’s strong focus on inflation.

“While there are looming concerns about growth, the Fed has decided that in the fight against inflation, it will shoot first and ask questions later,” he said.

However, the central bank also left some room for easing its stance if the economy continues to weaken.

“The Committee stands ready to adjust the stance of monetary policy if necessary if risks arise that could hinder the achievement of the Committee’s objectives. The commission’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflationary pressures and expectations, and financial and international developments,” the statement said.


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; nor Kitco Metals Inc. neither the author can guarantee such accuracy. This article is for informational purposes only. It is not a request to exchange commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article assumes no liability for loss and/or damage arising from the use of this publication.

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