While the coronavirus pandemic progresses and more people become vaccinated, unemployment claims and Americans’ needs for financial assistance still hang in the air, top U.S. officials, like Federal Reserve Chairman Jerome Powell, say help is still coming.
On Thursday, Powell said the Federal Reserve System pledged to keep accommodations created during the current crisis in place until the economy reaches full employment and inflation is averaging around 2%. However, other financial experts are keeping a close eye on the stock market. Saxo Bank analyst Ole Hansen fears that more focus is on the U.S. dollar than its rivals, like gold.
Powell praises economic recovery and sees Fed pulling back help after ‘substantial’ progress
Powerful fiscal help from Congress combined with accelerated vaccine distribution has allowed the U.S. economy to recover faster than expected, Federal Reserve Chairman Jerome Powell said Thursday.
At some point, that will allow the central bank to dial back the help it has provided, though he said now is not that time.
“As we make substantial further progress toward our goals, we’ll gradually roll back the amount of Treasurys and mortgage-backed securities we’ve bought,” Powell told NPR’s “Morning Edition” in a live interview. “We will very gradually over time and with great transparency, when the economy has all but fully recovered, we will be pulling back the support that we provided during emergency times.”
U.S. stock market futures edged a bit lower after Powell spoke.
In the wake of COVID-19 lockdowns just over a year ago, the Fed cut benchmark short-term borrowing rates to near zero and has been buying at least $120 billion of bonds each month.
Powell and other Fed officials have pledged to keep that accommodation in place until the economy reaches full employment and inflation is averaging around 2%. He said the U.S. has made strides in getting to those goals
“In a nutshell, it’s a combination of better developments on COVID, particularly the vaccines, and also economic support from Congress. That’s really what’s driving it,” he said. “That’s going to enable us to reopen the economy sooner than might have been expected.”
More about why Powell says he has no regrets about the extraordinary measures the Fed took during the pandemic can be found here.
Kitco News/Anna Golubva
Gold price holds the line as U.S. weekly jobless claims reach lowest level since start of pandemic
The initial weekly jobless claims fell by 97,000 to 684,000 in the week to Saturday, beating market expectations, Kitco News reports.
This is the first time jobless claims fell below 700,000 since the COVID-19 pandemic began just over a year ago.
Economists’ consensus called for initial claims to come in at 730,000 following the revised level of 781,000 reported in the previous week.
The four-week moving average for new claims – often viewed as a more reliable measure of the labor market since it flattens week-to-week volatility – decreased to 736,250, from last week’s revised average of 749,000, the U.S. Labor Department said on Thursday.
Continuing jobless claims, which represent the number of people already receiving benefits, were at 3,870,000, during the week ending March 13, down by 264,000 from the previous week’s revised level of 4,134,000. The four-week moving average dropped to 4,120,750.
Traders monitor jobs data closely to gauge how it might impact the Federal Reserve’s monetary policy.
Gold edged down to daily lows but remained above $1,720 an ounce after the release of the data. June Comex gold futures were last trading at $1,726.50, down 0.52% on the day.
Reuters via CNBC/Breijesh Patel
Gold slips as dollar strength offsets Europe lockdown worries
Gold prices eased on Thursday as a stronger U.S. dollar overshadowed support from lower bond yields and worries that lockdowns across Europe would take a toll on the pace of economic recovery.
The dollar index rose to a four-month high against its rivals, making gold more expensive for holders of other currencies.
“We are in a rough patch in terms of risk appetite in general; that could add some support to [the] gold market, but right now the focus is on the dollar,” said Saxo Bank analyst Ole Hansen.
“Gold prices need to break above $1,765/oz level to attract renewed momentum.”
Spot gold was down 0.3% at $1,728.58 per ounce. U.S. gold futures were down 0.3% at $1,728.30 per ounce.
Sentiment in wider financial markets remained weak as investors grew wary about the economic outlook following a new round of coronavirus restrictions in the euro zone and potential U.S. tax hikes.
Read more about the impacts Hansen says the European lockdowns could have on gold here.