Gold price at highest in over two weeks ahead of Powell remarks

Jerome H. Powell. Credit: US Federal Reserve via Flickr.

Gold inched higher on Wednesday, reaching its highest in over two weeks, as both the US dollar and Treasury yields retreated ahead of Federal Reserve Chair Jerome Powell’s upcoming speech.

Spot gold rose 0.6% to $1,942.88 per ounce by noon EDT, having approached the key $1,950 level earlier. US gold futures were up 0.5% to $1,963.50 per ounce.

[Click here for an interactive chart of gold prices]

“The key is going to be what are Powell’s comments after the actual (rate) announcement,” with the markets expecting rates to be kept steady, said Bob Haberkorn, senior market strategist at RJO Futures, in a Reuters note.

“There are concerns about energy getting too high,” and whether the Fed would have to stay aggressive, Haberkorn added.

Surging oil prices add to inflationary pressures, in turn raising expectations that the Fed will keep rates higher for longer.

The Fed’s rate-setting committee is expected to release its decision and updated projections at 2 p.m. EDT, with Powell scheduled to hold a press conference soon after.

The US central bank is widely expected to keep rates on hold for now, but may also factor in new economic projections in its view on future hikes.

If it holds rates steady with a more hawkish view delivered by Powell, gold should hold its current range, said Chris Gaffney, president at EverBank World Markets.

The dollar and Treasury yields fell before the decision, while markets saw a roughly four in 10 chance of another hike before 2024, according to the CME FedWatch tool.

“What is still keeping the gold price supported is solid demand from central banks, which continue to diversify into gold,” said UBS analyst Giovanni Staunovo.

(With files from Reuters)