(Kitco News) - While off its highs, the gold market continues to hold solid gains on Wednesday and is largely ignoring more neutral comments from the Federal Reserve.
The U.S. central bank reiterated its current stance that it is in no hurry to ease interest rates as economic uncertainty and inflation pressures remain elevated, according to the minutes of the March Federal Open Market Committee meeting.
“In discussing the outlook for monetary policy, participants remarked that uncertainty about the net effect of an array of government policies on the economic outlook was high, making it appropriate to take a cautious approach. Emphasizing that uncertainty, a majority of participants noted the potential for inflationary effects arising from various factors to be more persistent than they projected. With economic growth and the labor market still solid and current monetary policy restrictive, participants assessed that the Committee was well positioned to wait for more clarity on the outlook for inflation and economic activity,” the minutes said.
Markets are largely ignoring the minutes as investors continue to focus on the economic chaos wrought by President Donald Trump’s broad import tariffs announced last week. The gold market is holding on to solid gains after pushing back above $3,000 an ounce early Wednesday. Spot gold last traded at $3,051.50 an ounce, up 2% on the day.
Although the minutes showed committee members were optimistic regarding the health of the U.S. economy, there are growing concerns surrounding Trump’s proposed tariffs.
“Participants observed that the available data suggested that the economy had continued to grow at a solid pace but that there were some indications that consumer spending growth might be moderating from its rapid pace over the previous two quarters,” the minutes said. “With regard to the business sector, most participants commented that contacts or surveys reported increased uncertainty about potential changes in federal government policies and a deterioration in business sentiment, which had led many firms to pause their capital spending plans.”
Looking beyond the minutes, markets could see a drop in volatility after Trump announced a 90-day pause on many of his reciprocal and 10% baseline tariffs on Wednesday.
The move comes after U.S. equity markets have been free-falling in the last seven days due to broad import tariffs. The selloff became more urgent in the last few days as U.S. long-dated bonds started selling off with yields seeing the biggest one-day rise in decades.
Although the pause on U.S. import tariffs will help calm some market fears, some analysts note that the bond selloff is a lot more consequential and could further support gold prices. Analysts have said that the selloff in bonds can’t be as easily repaired as equity markets.
Analysts have said that higher bond yields could force the Federal Reserve to cut interest rates more aggressively than expected and introduce new quantitative easing measures to bring down yields.
