Central banks bring more volatility into the gold space
On Wednesday, the Federal Open Market Committee announced it will raise rates by 75 basis-points as the markets had anticipated, which is the highest level since January 2008 at 3.75%-4%. This marks the fourth consecutive 75 bps raise as the Fed maintains a hawkish approach in its attempt to curb an inflation rate the central bank insisted was"transitory" until higher CPI readings had become entrenched earlier this year.
However, Powell added that even though a slowdown in rate hikes might happen in December or February, the U.S. central bank is likely to take rates higher than previously thought."At some point.….it will become appropriate to slow the pace of increases as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2% goal," he said. "We still have some ways to go.
The Nasdaq Composite was the worst hit index, closing 3.4% down on Wednesday. If Powell's aim was to signal a slowdown in rate hikes but prevent a market rally, then he has done so successfully, as unpopular as it may be as we head into the mid-term U.S. elections next week. Despite bullion moving higher from important technical support at $1620 after Bailey's statements, the Fed pushing out an imminent interest rate pivot further has opened the door wider for lower gold prices. A close below $1620 in the safe-haven metal would bring long-term support at the $1550 level into view.
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