Early this morning, the price of gold experienced a sharp increase after the Federal Reserve (Fed) set interest rates on hold and signaled an end to their tightening cycle.
Although there is still room for further tightening measures, the consideration for interest rate cuts is considered a 'dovish' indicator by The Fed and makes the price of gold hover around $2,000 following a significant depreciation of the US dollar.
Based on the latest FOMC report, the Fed kept the monetary policy range between 5.25% to 5.50% for the third meeting in a row. Indirectly, this will encourage inflation to moderate slightly but still remain high.
The US central bank stated that they will remain dependent on the data to set monetary policy next year. However, they are still consistent to bring inflation to the 2% target.
The Fed has already completed its tightening cycle with the federal funds rate expected to remain at 5.4% for the remainder of the year. They also plan to ease monetary policy by 72 basis points in 2024 from 5.33% to 4.61%.
Growth is expected to increase to 2.6% from 2.1% with overall inflation expected to drop below 3% and core to decrease towards 3.2% where both are projected to decrease compared to September.
For now, the price of gold is seen to have managed to return to the upper $2,000 level despite being traded erratically due to the follow-up statement delivered by the Fed Chairman, Jerome Powell.
