Gold Prices See Its Best Gains In A Month After Fed Disappoints Dollar Bulls
(Kitco News)- The gold market pushed to a two-week high, posting its bestgains since last month’s equity market meltdown as the Federal Reservedisappointed U.S. dollar bulls after projecting only three rate hikes this year,according to some analysts.
The gold market is trading just down from session highs,benefiting from the fact that the Federal Reserve is in no hurry to raiseinterest rates faster than what is already expected. April gold futures last traded at $1,332.80an ounce, up almost 1.59% on the day. At one point, following the FederalReserve’s monetary policy decision, gold prices were up almost 2% on the day.Gold was up more than 1% on the day ahead of the decision.
Andrew Grantham, senior economist at CIBC World Markets,said that gold is benefiting from a weaker U.S. dollar after bullish investors betthat the Federal Reserve would signal four rate hikes this year.
“I would describe the Fed as optimistic but they were notmore hawkish and that is disappointing U.S. dollar bulls,” he said. “Going intothis meeting we thought it was going to be difficult for the median forecast torise to four rate hikes.”
Colin Cieszynski, chief market strategist at SIAWealth Management, said that because the central bank was not as hawkish asexpected, U.S. dollar traders are now focusing on the risk that risinggovernment debt will have on economic growth.
“If the government’s stimulus efforts don’t pushgrowth above 3% then there is no reason for the fed to accelerate the pace ofrate hikes that they are already doing,” he said. “That is going to hurt theU.S. dollar.”
During his first press conference, newly mintedFederal Reserve Chairman Jerome Powell said that he thought it was unlikelythat stimulus measures like the government December tax cut could boost growthabove 3%. Powell added that the U.S. economy would need to see a significantincrease in productivity to push growth above 3%.
#Powell: It's unlikely tax cuts will push U.S. #economic #growth to 3%. It would take a significant increase in production to get to that level | LIVE #FED |
— Kitco NEWS (@KitcoNewsNOW) March 21, 2018The central bank’s updated forecasts sees the U.S.economy growing by 2.7% this year.
Cieszynski said that he estimates gold pushing higherin the near-term, but maybe not having enough momentum to break out of itsnear-term range. He noted that ultimately the central bank still isn’t verydovish as it expects to raise interest rates for the next three years.
He added that gold prices need to push above $1,360 anounce to signal a break of its near-term range.
“If $1,360 breaks then we have a whole new ball gamebut until that happens the market is just testing the top of its range,” hesaid. “The Fed wasn’t hawkish enough to drive gold prices down but I also don’tthink it was dovish enough to drive prices out of its trading range.”
By Neils ChristensenFor Kitco News
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