(Kitco News) -
The gold market continues to hold support above $2,050 as the Federal Reserve provides few hints on when it will start cutting interest rates.
As expected, the Federal Reserve left interest rates unchanged in a range between 5.25% and 5.50% on Wednesday. However, analysts note that they have been more interested in any potential forward guidance from the central bank as to when its easing cycle will begin.
According to the latest monetary policy statement, the central bank might not be in a hurry to adjust its monetary policy as it remains fairly upbeat on economic activity even as risks loom on the horizon.
“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have moderated since early last year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated,” the monetary policy statement said. “The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”
The central bank committee members also made it clear that although inflation pressures have eased, it still remains their top priority.
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the statement said.
The gold market is not seeing much reaction from the latest comments from the Federal Reserve. April gold futures last traded at $2,063.70 an ounce, up 0.62% on the day. Gold is holding its ground even as the monetary policy statement supports bullish momentum in the U.S. dollar.
Adam Button, chief currency strategist at Forexlive.com said that the statement has a slightly hawkish bias as the central bank appears to be pushing back on the idea of a potential March rate cut.
Paul Ashworth, Chief North American economist at Capital Economics, said that despite the tone, a potential March rate cut is not off the table just yet.
“While at first glance that language might appear to be aimed at pushing back the timing of rate cuts currently priced into futures markets, we are not so sure,” Ashworth said. “If the Fed really wanted to move market expectations, it could have said that it would “be patient” in removing accommodation. Instead, what we have is mostly a restating of the existing position that everything is data dependent.”
