Gold Price Edges Up After Fed Comments on Rate Hikes

Gold inched up on Thursday (November 29) following Federal Reserve Chair Jerome Powell’s remarks which implied that the central bank would go slow on interest rate hikes in 2019.

The yellow metal was given space to climb when the US dollar fell after Powell’s comments. A weaker dollar makes the precious metal cheaper for investors to hold versus other currencies.

“The hint from the Fed that they are closer to ending the current rate hike cycle caught the markets somewhat by surprise. We saw a good lift up in gold price close to the highs we’ve seen over the past few weeks,” said Jonathan Butler, analyst at MUFG Investor Services.

“Treasury yields and dollar dropped back, and that was quite supportive of gold,” he added.

Despite the yellow metal climbing over 1 percent following the intel into the 2019 hikes, gold’s gains were limited as investors recognized that Powell’s statement had a dovish tone, which helped revive risk appetite. World stocks were driven to their highest levels in more than two weeks despite the greenback and bond yields falling.

Powell also said that the central bank’s policy rate is “just below” estimates of a level that does not break nor boost a healthy US economy.

“Gold was revitalized by Powell’s speech and his dovish tone. Despite this move, we are still in a lateral phase. We could have a first positive signal if bullion surpasses US$1,235, paving the way for further rallies,” stated Carlo Alberto De Casa, chief analyst at ActivTrades.

Prior to Powell’s comments, market watchers believed that 2019 would see the same gradual rate hikes from the Federal Reserve that 2018 experienced.

Moving forward, investors will now turn their attention to the release of minutes from the US central bank’s November meeting in order to obtain further clues on the Fed’s monetary tightening path.

Minutes will be released Thursday (November 29) afternoon.

As of 11:24 a.m. EST, gold was up 1.10 percent, trading at US$1,225.90 per ounce.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.