Gold Prices Fluctuate Amid Trade War Uncertainty and Fed Policy
Bucharest — May 18,2024 — The price of gold is being heavily influenced by the Federal Reserve’s monetary policy and ongoing trade war discussions,as suggested by recent market movements. After a dip, the precious metal experienced a rebound, with investors carefully observing the impact of interest rates and uncertainties related to international trade. These factors combined with the safe-haven status of gold are driving the market. For deeper insights, consult reputable financial sources.
Gold Prices Fluctuate Amid Trade War Uncertainty and Fed Policy
Gold prices experienced a rebound after a dip on Wednesday, influenced by the Federal Reserve’s decision to maintain interest rates and Chairman Jerome Powell’s remarks indicating no immediate rush to lower them. This comes amidst ongoing uncertainty stemming from the trade war.
The precious metal traded near $3,375 an ounce, recovering from a 2% loss in the previous session. Powell cautioned that President Donald Trump’s customs duties policy could heighten inflation and slow economic growth. However, he suggested the Federal Reserve would maintain its monetary policy until officials gain a clearer understanding of the economy’s trajectory.
Powell’s Viewpoint on Inflation
Powell addressed the potential inflationary effects of the trade policies, stating:
The effects of this on inflation might potentially be short -term, and reflect one time change in the price level.
Jerome Powell, Chairman of the Federal Reserve
He also acknowledged the possibility of more sustained inflationary pressures, adding, it is also possible that the inflationary effects will be more continuous.
powell emphasized that any trade-related clarity would need to come from the White House.
Dollar Strength and interest Rate Expectations
The dollar’s rise following powell’s statements made gold more expensive for international buyers. Furthermore, reduced expectations for interest rate cuts can negatively impact gold, as it doesn’t offer a yield, making it less attractive in higher interest rate environments.
Despite this, market participants still anticipate at least three interest rate reductions before the end of 2025, with the first cut perhaps occurring in July.
Market Volatility Fuels Gold’s Ascent
Investors are closely monitoring trade-related announcements from the White House. President Trump stated on Wednesday that he was unprepared
to proactively reduce customs duties on China before a significant meeting in Switzerland later in the week to discuss trade relations.
Gold has surged approximately 30% since the start of the year, as investors seek refuge amid the uncertainty generated by Trump’s policies.
Recent performance and Influencing Factors
Gold reached a record high exceeding $3,500 an ounce in april before experiencing a slight decline in recent weeks. Speculative demand in china and central bank purchases have also contributed to the price increase.
As of 8:40 a.m. in Singapore, the spot gold price increased by 0.5% to $3,382.82 an ounce. The Bloomberg dollar index remained stable after a 0.5% increase on Wednesday. Silver prices were unchanged, while palladium saw a slight increase.
