Investor Caution Weakens Gold
Fed officials said last night that they remain patient in maintaining interest rates in the range of 4.25%-4.50%, citing risks of still-high unemployment and slowly rising inflation despite some deterioration in the tariff war.
One of their statements said that “Participants agreed that with the economy and labor market still solid and the current monetary policy stance fairly tight, the committee is well positioned to await further clarity on the outlook for inflation and economic activity,” according to minutes of the Federal Open Market Committee meeting that ended May 7.
Economists widely expect tariffs to raise inflation and weigh on economic growth, although some analysts have reduced their expectations for a recession this year after the de-escalation with China.
The Fed minutes, which highlighted risks of inflation and recession, supported gold prices as a hedge. However, the current price stability reflects investor caution as they await further economic data and future Fed monetary policy.
In the short term, gold is expected to experience a limited decline while in the long term it will remain positive because it is still influenced by factors including high, uncertain inflation, global economic uncertainty, and dependence on safe haven assets, three reasons that can lift gold higher in the future
Source: (mrv@Newsmaker
