Gold prices seesaw after Fed meeting

Gold prices seesawed on Wednesday, surging the $2,050 per ounce level immediately after the Fed meeting, then plummeting to $2,030 per ounce. If gold prices increase, resistance may be encountered near $2,050 per ounce, while if gold prices decline, support may be encountered near $2,010 per ounce. 

Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar exhibited high volatility on Wednesday. The dollar index dropped below the 103.0 level after the Fed rate announcement then jumped to 103.8 after Fed Chair Jerome Powell’s press conference. US treasury yields declined, with the US 10-year bond yielding approximately 3.97%.                 

Gold prices were volatile on Wednesday after the US Federal Reserve monetary policy meeting. The Fed kept interest rates unchanged on Wednesday, within a target range of 5.25% to 5.50%, which was in line with expectations. The Fed, however, has removed the tightening bias from its policy statement, indicating that the central bank is preparing to pivot to a less restrictive monetary policy. The release of the FOMC statement pushed the dollar and treasury yields down, boosting gold prices. 

Fed Chair Jerome Powell’s press conference after the meeting attracted a lot of attention as traders focused on the central bank’s forward guidance. Powell’s speech caused market volatility as the Fed Chair stated that there would be no rate cuts in March, dashing some investors’ hopes. Rate cut expectations in March dropped rapidly after Powell’s statement, while market odds that the Fed will cut interest rates in May and June are rising rapidly. The dollar surged after Powell’s speech, which balanced out the FOMC statement’s dovish outlook, causing gold prices to plummet.

Gold prices surged Tuesday as the International Monetary Fund upgraded its global economic growth outlook. The IMF raised its global growth forecast for 2024 to 3.1%, from 2.9% in October. The organization based its updated estimate mainly on increased economic growth in the US and China and on cooling inflationary pressures.

Gold prices are propped up by rising geopolitical tensions, which raise the appeal of safe-haven assets. Concerns that the Geopolitical crisis in the Gaza area may spread to neighboring countries are raising demand for safe-haven assets, boosting gold prices. The war between Israel and Hamas is threatening to spill over the Middle East as tensions rise in the Red Sea area. 

Attacks on ships in the Red Sea area by Yemen's Iran-backed Houthi militia increase concerns that the crisis will widen to other areas in the region. The US and the UK have launched a coordinated action against Houthi rebels in Yemen. A deadly drone attack against US forces over the weekend intensified tensions in the Middle East, boosting gold prices. The US has accused Iran of being behind the attack and has threatened to retaliate, although the Iranian government denies any involvement in the drone attacks. 

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Written by:
Myrsini Giannouli

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