GOLD PRICES approached their record US Dollar high on Thursday as investors interpreted the latest Federal Reserve statement as opening the possibility of a pause in interest-rate increases.
Spot gold reached US$2,072.19 per ounce early in the session, just below the US$2,072.49 record cited by Reuters.
The metal subsequently eased, trading approximately 0.2% higher at US$2,042.43 per ounce at 11:45 GMT.
The rally followed the Federal Reserve’s decision on Wednesday to increase its benchmark target range to 5.00–5.25%.
Although the Fed raised rates again, its statement emphasised that decisions about any additional tightening would take account of previous increases, the delayed effects of monetary policy and developments in the economy and financial system.
The central bank said tighter credit conditions were likely to weigh on economic activity, hiring and inflation, although the extent of those effects remained uncertain.
It also described the US banking system as sound and resilient while acknowledging that inflation remained elevated.
The Fed confirmed that it would continue reducing its holdings of Treasury securities, agency debt and agency mortgage-backed securities.
For bullion, expectations about the future path of interest rates can matter as much as the latest decision. Gold does not pay interest, so a potential end to rate increases can alter its relative appeal against interest-bearing assets.
However, the Fed did not commit to a pause or announce a rate cut. Its statement left future decisions dependent on incoming information, keeping inflation, employment and credit conditions in focus.
Disclaimer
This publication is for educational purposes only and does not constitute financial advice. It does not take into account any person’s investment objectives, financial situation or needs. Before making aninvestment decision, consider whether the information is appropriate to your circumstances and seek advice from a licensed financial adviser where necessary. Past performance is not a reliable indicator of future performance.