Immediately following the meeting of the U.S. Federal Bank yesterday, the U.S. dollar sank, while stocks and gold drove higher.
Gold reached six-year highs of almost $1,400 after the Wednesday meeting of the U.S. Federal Bank confirmed market speculation that it would soon embark on an interest rate cut cycle.
After rallying for several weeks on the expectation of interest rate cuts, spot prices for the yellow metal jumped by as much as 2.5 percent on Wednesday to reach $1,394.11 per ounce – the highest since September 2013 – while futures in New York reached $1,397.70 an ounce, «Bloomberg» reported (behind paywall).
The global trade war is also keeping gold prices elevated – precious metals tend to benefit from periods of higher volatility as uncertainty increases gold’s safe-haven appeal.
Potential Rate Cuts
The Fed left interest rates unchanged at 2.25–2.5 percent, despite pressure from U.S. President Trump for it to be lowered. However it suggested cuts could be introduced as early as next month to combat growing global and domestic risks, Reuters reported.
«In light of muted inflation pressures and increased uncertainties we now emphasize that the committee will closely monitor the implication of incoming information for the economic outlook and will act accordingly to sustain the expansion,» Fed chairman Jerome Powell said in the press conference following the meeting.
The 10-year U.S. Treasury yield fell 11 bps, plunging back below 2 percent for the first time since November 2016, erasing almost all the gains since President Trump was elected, while 30-year yields fell to 2.5 percent. At the start of the meeting, the U.S. dollar basket traded at 96.9 before falling to 96.62.
