In a swift response to the Federal Reserve’s hawkish stance, the gold price (XAU/USD) saw a modest revival during Thursday’s Asian trading session. After a recent decline, the precious metal climbed to approximately $1,928, offering a glimmer of hope to investors in the midst of economic uncertainty.
During its September gathering, the Federal Reserve announced its decision to maintain interest rates within the widely expected range of 5.25% to 5.50%. This move was accompanied by a decidedly hawkish tone, reflecting the central bank’s growing confidence in its ability to control inflation without causing harm to the economy or significant job losses. In a subsequent press briefing, Chairman Jerome Powell reiterated the Fed’s unwavering commitment to achieving a 2% inflation rate. He also emphasized the Fed’s readiness to raise rates if necessary.
The Fed’s latest quarterly projections hint at a possible interest rate increase later this year, with a forecasted range of 5.50% to 5.75%. These projections also suggest a more cautious approach to rate hikes in 2024 compared to previous expectations. The updated Summary of Projections (SEP) from the Fed indicates an anticipated interest rate of 5.1% by the end of 2024, up from the previous estimate of 4.6%. It’s important to note that rising interest rates increase the opportunity cost of holding non-yielding assets, which could put pressure on precious metals like gold.
As the week progresses, participants in the gold market will closely monitor upcoming economic data, including the US weekly Jobless Claims, the Philly Fed report, and Existing Home Sales, all scheduled for release on Thursday. Additionally, on Friday, the preliminary US S&P Global PMI for September will provide valuable insights that could offer a clearer direction for the valuation of gold in the coming days. Investors and analysts alike remain on high alert, navigating the complex terrain of financial markets influenced by central bank policies and economic data.