The safe-haven asset and yellow metal rose over $32 at the start of today’s trading session in London, despite the U.S. Central bank’s decision to interest the interest rate by 1percent in its latest effort to curb inflation. The Fed highlighted inflation as a risk to the economy while also ruling out larger hikes for the rest of 2022.
The unprecedented surge in the price of Gold came as a surprise, particularly after the Fed increased its interest rate as an outcome of the meeting it held on Tuesday and Wednesday. Although, the increase in the interest rate was expected to improve the dollar index (a measure of the strength of the U.S. dollar), however, a decline was seen which suggests that the increase of the interest rate has been adjusted for in the pricing of risky assets like Gold.
Gold futures went up by over 1.53%, currently trading at about $1,897.5 an ounce, from about $1,868.78 an ounce it traded in the last session. The dollar, which normally moves inversely to the gold, is experiencing a decline, as it trades near a one-month low.
Keynotes
- The Federal Reserve raised interest rates by the steepest increment since 2000 and decided to start shrinking its massive balance sheet, deploying the most aggressive tightening of monetary policy to control the soaring inflation.
- The U.S Central Bank’s policy-making Federal Open Market Committee on Wednesday voted to unanimously increase the benchmark rate by a half percentage point.
- The Fed hiked its interest rate to 1% on Wednesday.
- Fed Chair, Jerome Powell said the 75-basis points super-hike feared by investors is “not something that the committee is actively considering,” adding that policymakers view the “neutral” level of the fed funds rate to be 2% to 3%.
- Powell also appealed to Americans struggling with high inflation to be patient while policymakers take the hard measures to bring it under control.
- He also said the Fed has ruled out, for now, a rate hike of three-quarters of a percentage point at the central bank’s upcoming monetary policy meetings.
- The yellow metal- Gold, which is often regarded as a hedge against rising costs, jumped 1% on the release of Powell’s statement.
- However, the U.S. Treasury yields also fell sharply on Wednesday, boosting the yellow metal.
- The Bank of England will hand down its policy decision later in the day.
For other precious metals, such as; silver, it went up 2.58%, currently trading at $22.97 an ounce. However, Platinum marginally declined by 0.90%, and it’s currently trading at $987.50 an ounce. Also, Palladium declined by 0.15%, currently trading at $2,255.50 an ounce, as of the time of this writing.
