Gold prices ignore Powell’s hawkish stance as prices surge to session highs above $2,050.

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(Kitco News) – The gold market is trading at session highs, breaking through resistance at $2,050 an ounce even as Federal Reserve Chair Jerome Powell maintains his hawkish stance on U.S. monetary policy.

Although inflation has fallen sharply from last year’s 40-year highs, Powell said the central bank still has some work to do to bring inflation down to its 2% target. Wednesday, the core Personal Consumption Expenditures price index, the Federal Reserve’s preferred inflation gauge, said that in the last 12 months to October, inflation rose 3.5%.

“Over the six months ending in October, core inflation ran at an annual rate of 2.5 percent, and while the lower inflation readings of the past few months are welcome, that progress must continue if we are to reach our 2 percent objective,” he said his in prepared remarks.

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so,” Powell added.

However, Powell’s comments have not spooked the gold market as it trades near session highs, with prices solidly above initial resistance at $2,050 an ounce. February gold last traded at $2,077.90 an ounce, up 1% on the day.

Some analysts have said that gold could be overstretched as a March rate hike could be overly optimistic. Many economists expect that the economy will only be soft enough for a rate hike at the end of the second quarter.

Some market analysts have said that although the Federal Reserve may not be ready to cut interest rates anytime soon, but it is clear that they are not going to raise rates as the economy starts to slow.

In his remarks, Powell said that the risks of under- and over-tightening are becoming more balanced.

In a recent interview with Kitco News, Axel Merk, President and Chief Investment Officer of Merk Investments, said that this perception is providing the support for gold’s current rally.

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 accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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