Top Stories This Week: Gold Price Pulls Back After Spike, Central Banks Boost Holdings

It was a week of ups and downs for the gold price, which traded as high as US$1,957 per ounce and as low as US$1,863. At the time of this writing on Friday (February 3), the yellow metal was around US$1,865.

What factors are responsible for that broad range? The US Federal Reserve played a role mid-week.

The central bank's first meeting of the year ran from Tuesday (January 31) to Wednesday (February 1), and it ended with an interest rate hike of 25 basis points, the smallest since last March. The Fed's benchmark interest rate now sits at 4.5 to 4.75 percent.

Chair Jerome Powell's post-meeting comments always attract attention, and this time around he said that the process of disinflation has begun — in other words, prices are now rising at a slower pace than they were previously.

Powell also addressed the question of whether the US is heading for a recession, saying he sees a path back to 2 percent inflation without "a really significant economic decline or a significant increase in unemployment."

After rising ahead of the Fed meeting, gold continued to gain after it wrapped up, reaching its peak for the week on Thursday (February 2). But the precious metal fell off a cliff on Friday (February 3) as January jobs data in the US surprised to the upside — employers added 517,000 jobs, while the unemployment rate sank to 3.4 percent, the lowest since May 1969.

The unexpected reading has generated questions about the Fed's path forward. With the employment situation looking strong, the central bank may make the decision to keep rates higher for longer. For now, market participants will have to wait and see.

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

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