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Gold prices steady as Fed's hints at ‘some’ hikes in 2019

22 December, 2018, 19:30 | Author: Lawrence Cooper
  • Fed Chief Jerome Powell

U.S. gold futures rose 0.4 percent to $1,258.80 per ounce.

The Wednesday decision marked the Fed's fourth rate hike this year and the ninth since late 2015, as the US central bank moves forward on the path of monetary policy normalization.

"The market reaction suggests the market thinks the Fed got it wrong yesterday, and that the Fed's decision yesterday will ultimately manifest itself in weaker global growth, softer domestic inflation, and ultimately a reversal of course", economists for NatWest Markets wrote in a note on Thursday.

Spot gold was little changed at $1,259.34 USA per ounce, after jumping more than 1% in the previous session. Be careful fellas, we also have a series of fundamentals which can impact gold prices, especially the GDP data from the United States.

"A number of tailwinds are in place for it (gold) to move significantly higher during the month including falling USA interest rates, a declining or at least a stalling dollar, wobbly U.S. equity markets", INTL FCStone analyst Edward Meir said in a note.

The dollar was steady in Asian trade, managing to recover from the previous session's low as markets came to terms with the Fed's outlook. The Fed has boosted borrowing costs three times this year and market observers widely expect a fourth rate hike in December.

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"In his latest report, Gold said that his base case is for gold prices to trade in a range between $1,275 and $1,325 in the next 12 months; however, he added that there is a growing probability that the firm's bull-case scenario comes to fruition, which would see gold prices trade between $1,375 and $1,425, according to Kitco".

Asian shares retreated on Thursday from their previous session's declines. Investors who were hoping for a firmly dovish statement that dropped the phrase "further gradual increases" were left disappointed after the Fed flagged "some further gradual increases" on rates were still on the cards.

As investors flocked to the safety of government bonds, U.S. benchmark Treasury yields fell to more than eight-month lows on Wednesday.

Among other precious metals, palladium rose 0.4% to $1,269.48 US per ounce, but was up about 1.2% for the week in what would be its fourth consecutive weekly gain.

Silver rose.77 percent to $14.71 per ounce, having earlier hit its highest since November 2 at $14.84 an ounce, while platinum rose 0.4 percent to $789.50.

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