Gold futures are rallying after the Federal Reserve refused to change course amid rising Treasury yields and inflation concerns. The yellow metal, which had come under pressure from a strengthening US dollar and a rallying bond market, is looking to test $1,750 now that the central bank has dismissed tapering its aggressive monetary policy positions. Could this finally be the start of a renewed bull market for gold prices?
April gold futures surged $15.00, or 0.87%, to $1,745.90 per ounce at 19:39 GMT on Wednesday on the COMEX division of the New York Mercantile Exchange. Gold is on track for a weekly gain of at least 1%, although it is still down about 8% year-to-date.
Silver, the sister commodity to gold, might be targeting $27. May silver futures soared $0.542, or 2.08%, to $26.545 an ounce. The white metal has struggled to hold onto its 2020 gain, trading relatively flat on the year. Over the last 12 months, however, silver prices are up 121%.
The metals market is picking up gains in the middle of the trading week on comments and decisions made by the Federal Open Market Committee (FOMC). Policymakers agreed to leave the benchmark Fed funds rate at 0.25% while maintaining its expansive quantitative easing program.
Fed officials agree that the gross domestic product (GDP) will spike 6.5% this year and then subside to around 2% in 2022 and 2023. Inflation is forecast to hit 2.59% within the next five years. With President Joe Biden’s $1.9 trillion coronavirus stimulus and relief plan and the vaccine rollout initiative, the Eccles Building is confident that the US economy will rebound.
That said, Fed Chair Jerome Powell dismissed tightening monetary policy any time soon. And the FOMC does not think a rate hike is happening until 2023 at the latest. This sparked a rally in the broader financial markets.
The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Following a moderation in the pace of the recovery, indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak.
Inflation continues to run below 2 percent. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.
The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on economic activity, employment, and inflation, and poses considerable risks to the economic outlook.
The Treasury market was mostly mixed, with the benchmark 10-year yield up 0.011% to 1.644%. The one-year bill slipped 0.006% to 0.068%, while the 30-year bond advanced 0.032% to 2.423%. Rising Treasurys are bad for non-yielding bullion because they increase the opportunity cost.
The US dollar erased its gains on Wednesday. The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, fell 0.47% to 91.43, from an opening of 91.86. A weaker buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.
In other metal markets, April copper futures soared $0.079, or 1.94%, to $4.1505 per pound. April platinum futures dipped $1.20, or 0.1%, to $1,217.90 an ounce. April palladium futures spiked $68.10, or 2.73%, to $2,560.00 per ounce.