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Gold price down but holding steady as the Federal Reserve raises interest rates by 25bps; signals it is not done

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(Kitco News) - The gold market is down but certainly not out as the precious metal largely ignores the Federal Reserve’s latest interest rate hike.

As expected, the Federal Reserve raised interest rates by 25 basis points. However, the central bank also signaled that it wasn’t done as inflation remains elevated.

“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time,” the central bank said in its monetary policy statement.

The gold market has seen some technical selling pressure as prices have been unable to break resistance at $1,950 an ounce; however the yellow metal still remains in a solid uptrend. April gold futures last traded at $1,940.40 an ounce, down 0.27% on the day.

Avery Shenfeld, senior economist at CIBC, said that although the Federal Reserve signaled that it will continue to raise rates, he only sees one more rate hike this year.

“[Federal Reserve Chair Jerome ]Powell to emphasize at the press conference that the FOMC is not contemplating an easing in policy this year. But he will have to admit that inflation is retreating faster than the central bankers had anticipated without having yet seen any opening in labor market slack. That fact is one key to our view that there’s only one further 25 bp hike ahead, as the FOMC will be less willing to deliver as much economic pain as it might previously have thought would be necessary should inflation run at the more moderate pace we’ve been seeing in the last 3-6 months,” he said.

Market expectations for future rates hikes haven’t changed in rection to the latest monetary policy statement. Markets continue to price in one more rate hike in March and then see the potential rate cuts by the end of the year.

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