Fed Chair Jerome Powell expressed readiness to raise interest rates at the March meeting. Gold prices fell by more than one percent.
Gold prices are still depressed at low levels after the free fall due to the announcement of the Fed's monetary policy early this morning. Spot gold was trading at $1816.41 an ounce, while gold futures on the Comex in New York fell 0.7% to $1816.20. As of this writing on Thursday afternoon (27/January), the XAU/USD chart is showing a bearish move at $1815.96.
Fed Chair Jerome Powell said that the US central bank is ready to raise interest rates in March. In addition, each subsequent FOMC meeting will discuss countering the current rise in US inflation.
"The committee is willing to raise the Fed Funds Rate at the FOMC meeting next March, if conditions are favorable," Powell said at a press conference after the policy announcement.
Powell's hawkish tone boosted the 10-year US Treasury bond yield to a 23-month high at the opening of the Asian session this morning. The US dollar also rose more than half a percent. As a result, the price of gold was depressed.
"Powell's hawkish comments practically warranted a rate hike in March. The emphasis on the strength of the economy and the Fed's oversized balance sheet that needs to be scaled back has fueled the bond sell-off and the USD higher. Gold has also been pressured to recent lows," said Tai Wong, an independent trader in New York.
Russia-Ukraine Tension Only Supports Gold Prices
The only thing that gold bulls can rely on right now is geopolitical tensions, in this case the Russo-Ukrainian conflict that the Western bloc is interfering with. After the US threatened to impose personal sanctions on Russian President Vladimir Putin, the White House offered a diplomatic route to discuss Russia's demands.
"Elevated geopolitical tensions have fueled interest in safe havens. But for now, gold prices are likely to hold on to value rather than rally significantly amid the flight to safety," said Standard Chartered analyst Suki Cooper.
Similarly, Tai Wong also said that although demand for physical gold and ETFs is still strong, Powell's hawkish remarks are likely to cap gold around $1850 in the short term.
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