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Gold price continues to consolidate as Fed's Powell reiterates hawkish stance; ECB's Lagarde remains patient

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(Kitco News) - The gold market remains firmly caught with a tight consolidation pattern and has largely ignored hawkish comments from Federal Reserve Chair Jerome Powell.

Thursday, in a panel discussion during the International Monetary Fund’s annual spring meeting, Powell reiterated the central bank’s case to aggressively raise interest rates. he added that it is essential the Federal Reserve uses its tools to get inflation and price stability under control.

“Economies don’t work without financial stability,” he said.

Powell said that it could be appropriate to raise interest rates by 50 basis points. The Federal Reserve has signaled that the committee could see at least two 50-basis point moves at the next two meetings.

He added that because of inflation, the central bank is prepared to be more aggressively compared to its previous tightening cycle.

“Inflation is much higher now and the policy rate is more accommodative. It is appropriate to move more quickly,” he said.

Although gold prices remain in negative territory, the precious metal was relatively unfazed by Powell’s comments. June gold futures last traded at $1,945.70 an ounce, down roughly 0.5% on the day.

Helping gold, is the fact that the U.S. dollar didn’t find much traction as the Federal Reserve’s monetary policy stance is a stark difference compared to the European Central Bank’s trajectory.

During the same panel discussion ECB President Christine Lagarde, reiterated Europe’s more patient stance even as the region faces rising downside risks to the economy and upside inflation pressures.

Lagarde noted that although European inflation is well above the central bank’s target, a lot of it is because of rising energy costs, which has been impacted by Russia’s war with Ukraine. She added that the inflation threat continues to be driven by supply-side issues.

Lagarde said that the ECB will continue to follow its planned sequence to ends its monthly asset purchases sometime in the third quarter and then it will look at when it would be appropriate to raise interest rates.  

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