Gold price holding its ground as the Federal Reserve raises interest rates by 75 bass points

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(Kitco News) – The gold is seeing some modest buying pressure even as the Federal Reserve expects to continue to tighten monetary policy this year as it acknowledges slowing economic momentum.

As expected the Federal Reserve raised interest rates by 75 basis points. However, according to some analysts, markets have been looking past today’s decision and are focusing on the central bank’s forward guidance.

In its monetary policy statement the central bank said it “anticipates that ongoing increases in the target range will be appropriate.”

The gold market is holding its ground following the latest decision. August gold futures last traded at $1,720.80 an ounce, up 0.18% on the day.

Although the Federal Reserve is looking to tighten interest rates further, it did note that economic activity is slowing. However, inflation remains the committee’s top priority.

“Recent indicators of spending and production have softened. Nevertheless, job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the statement said. “Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.”

The central bank also left some room open to a softening of its stance if the economy continues to weaken.

“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments,” the statement said.

Avery Shenfeld, senior economist at CIBC, said that the statement reflects the Fed’s solid focus on inflation.

“While there are looming concerns over growth, the Fed has decided that in the battle against inflation, it will shoot first and ask questions later,” he said.

However, the central bank also left some room open to a softening of its stance if the economy continues to weaken.

“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments,” the statement said.


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. the author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages from the use of this publication.

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