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Gold Market Sees Little Reaction To Positive Tone From Fed's Powell

Kitco News

(Kitco News) - Gold prices remain under pressure and are seeing little reaction to modestly positive comments from Federal Reserve Chairman Jerome Powell.

Powell's opening remarks were released ahead of his appearance before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, U.S. Senate. He noted that although the central bank remains “patient” on monetary policy, he was positive on his economic outlook.

He said that the economy is health and economic growth in 2019 will be solid but slower than 2018.

“While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals,” he said.

The gold market has seen little reaction to Powell’s opening statement. April gold futures last traded at $1,327.60 an ounce, down 0.14% on the day.

Avery Shenfeld, senior economist at CIBC Capital Markets, said that Powell’s opening statement didn’t add much to what has been said since the central bank’s January monetary policy meeting.

“While some see the Fed outlook as neutral, we still see a slightly hawkish tilt given Powell's emphasis on the healthy status and favorable outlook for the US economy. Still, nothing in this to alter our view that the Fed will be on hold through the first half of the year,” he said.

Negative for the gold market, Powell said that the central banks sees weak inflation pressures but remains optimistic that over the long-term inflation will hit its 2% target.

“Recent declines in energy prices will likely push headline inflation further below the Federal Open Market Committee's (FOMC) longer-run goal of 2 percent for a time, but aside from those transitory effects, we expect that inflation will run close to 2 percent.

Although Powell was relatively poisitve on the U.S. economy, he noted long-term issues that need to be addressed.

Although Powell was relatively poisitve on the U.S. economy, he noted long-term issues that need to be addressed.

"For example, productivity growth, which is what drives rising real wages and living standards over the longer term, has been too low. Likewise, in contrast to 25 years ago, labor force participation among prime-age men and women is now lower in the United States than in most other advanced economies," he said. "Other longer-run trends, such as relatively stagnant incomes for many families and a lack of upward economic mobility among people with lower incomes, also remain important challenges. And it is widely agreed that federal government debt is on an unsustainable path."

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