Gold prices are pushing closer to $1,800 an ounce on Wednesday. Gold and silver prices are moderately up as they see corrective rebounds from recent strong selling pressure. The Fed’s hawkish turn on inflation not being the only determinant in interest rate decisions sent gold down 6% last week. Experts say the precious metal is back on the move, adding that a price in the mid-$1,800s could draw back the institutional investors.
Reuters via CNBC/Arundhati Sarkar
Gold firms as Powell dials back rate hike rhetoric
Gold prices rose on Wednesday, propped up by a subdued dollar after U.S. Federal Chairman Jerome Powell signaled interest rates would not be hiked too quickly.
Spot gold rose 0.3% to $1,783.60 per ounce by 1156 GMT and U.S. gold futures were 0.3% higher at $1,783.20.
Powell said on Tuesday that inflation would not be the only determinant in interest rate decisions, calming investors worried about policy tightening after the Fed’s hawkish turn and sending the dollar near one-week lows.
The hawkish shift had sent gold down 6% last week, its biggest weekly decline since March 2020 when the COVID-19 pandemic hammered global markets.
Expectations of lower interest rates tend to support gold since that would translate into reduced opportunity cost of holding bullion, which pays no interest.
Gold tends to over-respond to a “nuanced delivery” from the Fed, independent analyst Ross Norman said.
The precious metal is seeing some bargain hunting given the recent big correction, and a move above $1,800 and back towards the mid-$1,800s could draw back the institutional investors, Norman added.
You can read the full story, here.
CNN Business/Julia Horowitz
The global recovery is running red hot. Here’s proof
Supply chain issues and other post-pandemic headaches can’t mask this reality: The global economic recovery is powering ahead.
What’s happening: Business activity within the 19 countries that use the euro grew at the fastest rate in 15 years in June, according to the Purchasing Managers’ Index from IHS Markit, a closely-monitored source of data.
Meanwhile, home prices in the United States rose at the quickest pace on record in May, reaching new highs due to a shortage of stock and exploding demand. The median existing-home price last month was $350,300, according to a report from the National Association of Realtors, up 24% from 2020.
The phenomenon is global. House prices in the Netherlands increased nearly 13% year-over-year in May, the largest increase since 2001.
Step back: The global economy is clearly still trying to work out kinks in the system.
“Despite firms taking on extra staff at the sharpest rate for almost three years, June saw a record rise in backlogs of work, a further near-record lengthening of supply chains and the increasingly widespread depletion of warehouse inventories,” IHS Markit found in its survey of European businesses.
Keep reading, here.
Fed Chair Powell says it’s ‘very, very unlikely’ the U.S. will see 1970s-style inflation
Federal Reserve Chairman Jerome Powell acknowledged Tuesday that some inflation pressures are stronger and more persistent than he had anticipated, though still not on par with some of the worst episodes the U.S. has seen historically.
Under questioning from a special House panel, the central bank leader continued to attribute most of the recent inflation surge to factors closely tied to the economic reopening.
Among them, Powell cited airline tickets, hotel prices and lumber along with generally surging consumer demand pumping up an economy that a year ago faced substantial government-imposed restrictions in the early days of Covid-19.
Those factors, he said, should “resolve themselves” in the coming months.
“They don’t speak to a broadly tight economy and to the kinds of things that have led to higher inflation over time,” he told the House Select Subcommittee on the Coronavirus Crisis. Powell’s mandated testimony provided an economic update and covered the pandemic-related tools Congress gave the Fed during the crisis.
“I will say that these effects have been larger than we expected, and they may turn out to be more persistent than we have expected,” he added. “But the incoming data are very consistent with the view that these are factors that will wane over time, and inflation will then move down toward our goals and we’ll be monitoring that carefully.”
Headline price inflation was up 5% year over year in May, the highest in nearly 13 years amid a jump in used car prices and a slew of other goods that have seen surging demand as restrictions have loosened.
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