Gold surges by over 1% as dollar and yields drop following Fed’s interest rate decision

May 1 (Reuters) – Gold prices surged over 1% on Wednesday following the Federal Reserve’s interest-rate decision and Chair Powell’s speech, which led to a decline in the dollar and U.S. Treasury yields.

Spot gold rose by 1.7% to $2,323.38 per ounce as of 15:15 p.m. ET (1915 GMT) after hitting a low not seen since April 5 earlier in the session. U.S. gold futures settled 0.4% higher at $2,311.

The dollar weakened by 0.3%, making gold more affordable for holders of other currencies, while U.S. 10-year bond yields also dipped.

The Federal Reserve opted to maintain interest rates at their current levels and highlighted a “lack of further progress” towards its 2% inflation target. Fed Chair Jerome Powell indicated that the central bank’s next rate adjustment is unlikely to be an increase, emphasizing the importance of sustaining its existing policy position.

Phillip Streible, chief market strategist at Blue Line Futures in Chicago, shared his perspective, stating, “I believe that we’re in a stagflationary environment where the Fed may eventually need to reduce rates. To reignite a rally towards $2,400, we’ll need a catalyst, potentially propelling gold towards all-time highs again.”

The global economic outlook’s uncertainty, coupled with geopolitical tensions and political election uncertainties, have bolstered gold’s attractiveness as a safe-haven asset. Chris Gaffney, president of world markets at EverBank, emphasized that these factors are currently favoring gold.

Recent data revealing higher-than-anticipated U.S. private payrolls in April indicated continued strength in the labor market at the start of the second quarter.

Spot silver climbed 2% to $26.81 per ounce, while platinum rose by 2.5% to $956.75. Palladium also experienced a marginal increase of 0.1% to $954.50.

(Reporting by Anushree Mukherjee, Anjana Anil, and Brijesh Patel in Bengaluru; Editing by Pooja Desai)

Published: 02 May 2024, 01:21 AM IST

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