Gold price storms to a record high after Fed sinks USD
The Fed left rates unchanged as expected last night and held onto their outlook for three cuts in borrowing costs this year, sending the US dollar down and gold to a record high.
The Chairman of the Federal Reserve, Jerome Powell, said recent high inflation readings had not changed the underlying "story" of slowly easing price pressures in the US, but added that recent data also had not bolstered the central bank's confidence that the inflation battle has been won.
The timing of those reductions still depended on officials becoming more secure that inflation can continue to decline towards the Fed's 2% target in an economy that continues to outperform expectations. While US dollar and bond yields ticked lower after the Fed decision, gold prices climbed to a record high.
(AI Video Summary)
Fed keeps interest rates steady
The recent decision by the Federal Reserve to keep interest rates steady caused an all-time high on Wall Street. This news was well received by the market, as it also suggested the possibility of three interest rate hikes in the coming year. However, Federal Reserve Chairman, Jerome Powell, conveyed that although recent high inflation readings didn't change the overall picture of gradually easing price pressures in the US, it also didn't boost the central bank's confidence in winning the fight against inflation. The timing of interest rate reductions will depend on officials' trust that inflation will continue to decrease towards the Fed's target of 2% in an economy that consistently surpasses expectations.
Impact on the USD
Another important development was the appearance of a bearish candle on the dollar basket chart. If this trend persists, there is a chance of the US dollar weakening further. This situation could provide traders an opportunity to consider a stronger euro. The euro has shown support at a rising line in the 200-period moving average. As of now, the euro is trading at 109.33, with resistance expected at the 110.00 level for those who have long positions on the EUR/USD trade.
Impact on gold
Furthermore, the precious metals market, particularly gold, had a strong day after the Federal Reserve's decision. Gold even reached a new record high of 22.23 before experiencing a slight pullback to 22.07. The decline in the dollar played a role in gold's performance, as it continued to approach historic highs.
In summary, the all-time high on Wall Street was influenced by the Federal Reserve's decision to maintain interest rates. This had a positive impact on the markets, and traders may want to consider betting on a stronger euro if the dollar continues to weaken. Additionally, the precious metals market, specifically gold, benefited from the Fed's action and the resulting depreciation of the dollar.
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