On Wednesday, gold prices went up a lot because the Federal Reserve, which controls interest rates, decided to keep them the same. They also sounded less worried about inflation, which is when prices keep going up. Gold is seen as a safe investment when inflation is high, so its price went up because the Fed hinted that they probably won’t raise interest rates soon.
After the meeting where the Federal Reserve decides on interest rates, the boss of the Fed, Jerome Powell, said in a press conference, “I don’t think we’ll raise interest rates next time. It’s not very likely.” This is different from before when the Fed was strongly saying they needed to raise rates more to control high inflation.
Powell also said that the Fed isn’t feeling more sure that inflation will go down, which is really important if they want to stop raising interest rates. He mentioned that they need to be more confident about inflation going down before they think about lowering interest rates. He said they didn’t see enough improvement in inflation during the first part of the year.
People who follow the markets thought that the statement from the Federal Reserve and what Powell said showed that they were being less strict (dovish) than expected. Many thought they would be stricter (hawkish). Because of this, the price of gold, which was already going up a bit before the meeting, shot up even more after the Fed’s announcements.
At 4:55 PM EDT, the price of gold for the most active June contract went up by $25.60, or 1.12%, to reach $2,328.80 per ounce. The rise in gold prices was helped by the U.S. dollar getting weaker, losing 0.69% compared to other major currencies.
Phillip Streible, who is a top market expert at Blue Line Futures in Chicago, shared his thoughts on how the market reacted. He said, “I think we’re in a situation where there’s both stagnation and inflation happening together. Eventually, the Fed might decide to lower interest rates. For gold to go back up to $2,400, we’ll need something new to happen, which will get people excited again and talking about reaching record highs.
The Federal Reserve said they might raise interest rates later if inflation doesn’t calm down. But because they admitted that progress has stopped and they’re not eager to raise rates more, this made gold prices go up a lot. Investors who want a safe place to put their money during uncertain times and because they think the Fed might stop raising rates or even lower them, turned to gold.
