(Kitco News) - The gold market is holding its recent gains but is not seeing any new momentum as Federal Reserve Chair Jerome Powell walks a fine line on monetary policy ahead of his two days of testimony on Capitol Hill.
Wednesday, Powell will be before the House Financial Services Committee. In his prepared statement that was released ahead of his appearance, Powell reiterated his stance that interest rates have peaked and are likely to go down this year, just not anytime soon.
“If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2 percent inflation objective is not assured,” Powell said in his opening remarkets. “The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
Powell’s comments are pretty much in line with what market analysts were expecting.
“There isn't anything new here from what the Fed has been saying for weeks,” said Adam Button, chief currency strategist at Forexlive.com.
The gold market is not seeing much reaction to Powell’s comments as it trades near its recent highs after its significant four-day rally. April gold futures last traded at $2,144.30 an ounce, up 0.11% on the day.
Powell also noted that the economic risks are balanced as the central bank’s monetary policy continues to slow activity.
“Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2 percent. At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment. In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook, and the balance of risks,” he said.
Market expectations surrounding the Federal Reserve’s monetary policy remain unchanged following Powell’s comments. According to the CME FedWatch Tool, markets still see a roughly 70% chance of a rate cut in June.
