(Kitco News) - The gold market is trading near session highs, solidly above $2,300 an ounce, as Federal Reserve Jerome Powell continues making the case for rate cuts this year.
Speaking at Stanford’s Business, Government, and Society Forum, Powell said that although the central bank is not looking to cut interest rates immediately, it still sees lower rates this year. He added that the central bank has time to gauge the strength of the economy and the path of inflation.
“We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent,” he said in his opening remarks. “If the economy evolves broadly as we expect, most FOMC participants see it as likely to be appropriate to begin lowering the policy rate at some point this year.”
Although Powell has struck a relatively neutral tone, the gold market focuses on the potential for lower interest rates. Gold continues to hit new record highs even as U.S. bond yields rise along with the U.S. dollar.
June gold futures last traded at $2,313.50 an ounce, up more than 1% on the day.
$Gold loving those sweet dovish songs from Chair Powell
fresh ATH $XAUUSD https://t.co/KyI1T4BStG pic.twitter.com/0gskIJGuzs— James Stanley (@JStanleyFX) April 3, 2024
Powell noted that despite higher inflation and robust labor market data the overall economic activity is little changed.
“The recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2 percent on a sometimes bumpy path,” he said.
Powell also reiterated that there are risks to moving too soon on rate cuts and moving too late.
“Reducing rates too soon or too much could result in a reversal of the progress we have seen on inflation and ultimately require even tighter policy to get inflation back to 2 percent. But easing policy too late or too little could unduly weaken economic activity and employment. As progress on inflation continues and labor market tightness eases, these risks continue to move into better balance,” he said. “As conditions evolve, monetary policy is well positioned to confront either of these risks. We are making decisions meeting by meeting, and we will do everything we can to achieve our maximum-employment and price-stability goals.”
