As expected, yesterday the US Federal Reserve raised rates by 50 bps and refuted rumors about their sharper increase in June. This remark brought great relief to the gold market: prices jumped.
Investors' nerves were on edge ahead of yesterday's Fed meeting. Many expected that the US central bank would announce its intention to raise rates by 75 bps next month.
According to the CME FedWatch tool, before the meeting, the probability of such a scenario was estimated by market participants at almost 100%.
Increased concerns about a more aggressive Fed rate put pressure on precious metals quotes.
Following the results of yesterday's trading, the value of June gold futures fell by 0.1%, or $1.80. Bullion closed at $1,868.80.Meanwhile, silver also showed a decline. The price of the asset dropped 1.2%, or 27 cents, to $22.40.
Precious metals ended the session even before the US central bank announced its decision on interest rates.
After the press conference of Fed Chairman Jerome Powell, the quotes of both gold and silver sharply changed their direction upward.
The US central bank did not present any surprises. As previously announced, it announced a rise in rates by half a percentage point. The last time the indicator increased by 50 bps was in 2000.
A sharp increase in rates did not bring down the value of precious metals. This indicates that prices took into account the Fed's hawkish attitude even before the official decision was made.
Moreover, the gold market breathed a sigh of relief when it heard Powell's comment. Speaking to reporters, he made it clear that at this stage the central bank does not plan to raise interest rates by 75 bps in June.
Gold began to rapidly gain altitude after Powell's speech. By Thursday morning, the value of the yellow asset rose by 1.72%, or $32, to $1,901.06.
Silver has also risen in price. At this time, it has gained 3.66% and traded at $23,218.
Today's gold rally in the context of the ongoing tightening of the Fed's monetary policy gives hope. Some analysts believe that the asset will be able to settle above the key level of $1,900 and continue to grow in the short term.
The price of the precious metal can be supported by the dose of sedative that investors received from Powell. For a while longer, real rates will definitely remain negative at the short end of the yield curve. Is this not an incentive for gold to shine again?
