Gold prices hovers near week-high after Fed Chair Powell’s statement

Gold prices held near their highest levels in a week in early Asian trading on Thursday after the U.S. Federal Reserve delivered a widely expected interest rate hike and investors digested fairly balanced comments from Chair Jerome Powell.

FUNDAMENTALS

Spot gold was up 0.2% at $1,975.05 per ounce by 0114 GMT, its highest since July 20.

U.S. gold futures also gained 0.2% to $1,974.70.

The Fed raised interest rates by a quarter-of-a-percentage point on Wednesday, setting the benchmark overnight interest rate in the 5.25%-5.50% range, and highlighting that another 25 bps hike could be possibly at the September meeting based on a wide range of data.

Fed Chair Jerome Powell also flagged that the economy still needed to slow and the labour market to weaken for inflation to “credibly” return to the U.S. central bank’s 2% target, yet were no longer forecasting a U.S. recession.

Gold is highly sensitive to rising interest rates as they increase the opportunity cost of holding non-yielding bullion.

The dollar and U.S. Treasury yields edged up after having fallen on Wednesday, limiting bullion’s gains.

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