Gold prices bounce off session lows as Powell signals patience on rates, defends Fed independence
The gold market remains under pressure but is off its lows after Federal Reserve Chair, in his final press conference as head of the central bank, said that the committee is in no hurry to change its current monetary policy stance in an environment of heightened uncertainty.
“We're in a good place to move in either direction; nobody's calling for a hike right now. So it really is going to depend on how things evolve,” he said.
Powell added that with interest rates hovering around 3.5%, they are pretty close to what he would describe as a neutral rate.
“I’ve always had it between three and four percent. We're a little north of three-and-a-half, so that's well within the range of what I consider reasonable,” he said.
The gold market did not see any major reaction to Powell’s comments. Spot gold last traded at $4,538.20 an ounce, down 1.2% on the day.
Although markets have priced out potential rate cuts this year, analysts have said that the gold market remains well supported, as a hike remains unlikely.
Although the U.S.-Iran war has created significant supply shocks in oil markets, driving up energy prices, Powell noted that long-term inflation expectations remain anchored around 2%.
Although this was Powell’s final press conference, it wasn’t exactly his swan song. He said that he will remain a governor on the Federal Reserve Board until he is confident that the central bank’s political independence is secured.
“My concern is really about the series of legal attacks on the Fed, which threaten our ability to conduct monetary policy without considering political factors,” he said. “In terms of when I will leave, I will leave when I think it's appropriate to do so.”
According to many analysts, the growing threat to the Federal Reserve’s independence has provided significant support for gold as a neutral monetary asset.
Analysts have said that gold prices remain well supported, as investors are concerned that political pressure will force the Federal Reserve to cut interest rates too aggressively, driving inflation pressures higher.
Although the Fed’s independence remains under “assault,” Powell said that he is confident the central bank will continue to make the right decisions to support its dual mandate.
“I am confident, as I said in my remarks, that the Fed will continue to make its decisions based on analysis, rigorous analysis, and not political considerations. But we've had to fight for it,” he said.
