Gold price holding steady as Fed Chair Powell strikes neutral tone
(Kitco News) - The gold market remains under pressure but is seeing little reaction to a relatively neutral tone from Federal Reserve Chair Jerome Powell.
In a relatively short opening statement, Powell said that U.S. economic activity has increased at a moderate pace even as risks to the global economy remain. Tuesday is the first day of Powell’s testimony before Congress. His opening statement was released ahead of his appearance before the House Committee on Financial Services
Gold prices are seeing little reaction to the relatively optimistic comments. April gold futures last traded at $1,576.20 an ounce, down 0.21% on the day.
Looking at interest rates, Powell said that current monetary policy will continue to support economic growth and push inflation to the committee’s symmetric 2% target.
“As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate,” Powell said.
As for concerns that the coronavirus will destabilize the global economy, Powell didn’t have much to say on the potential impact on the health of the U.S. economy.
“We are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy,” he said.
It’s not just gold prices that are seeing little reaction to Powell’s comments. Markets continues to see the Federal Reserve on hold for most of the year. The CME FedWatch Tool shows that markets see a 90% chance the U.S. central bank holds read steady next month.
Andrew Hunter, senior U.S. economist at Capital Economics said Powell’s comments point to a Federal Reserve that is on hold for 2020.
“Powell noted that while GDP and particularly consumption growth slowed last year, the recent trade truce with China and signs of improvement in the global economy had reduced some of the uncertainties around the outlook,” he said. “While the markets are apparently convinced that the virus will force the Fed to cut rates again by year-end, the likelihood of a US epidemic now appears low.”