Gold prices rallied sharply above the $2,300 milestone on Wednesday after the Federal Reserve kept rates unchanged while announcing that it would diminish the pace of the balance sheet reduction. In addition, Fed Chair Jerome Powell failed to provide forward guidance regarding lowering interest rates during the rest of the year.
The XAU/USD trades at $2,323, up by more than 0.40% as Fed Chairman Jerome Powell takes the stance. He said it wouldn’t be appropriate to cut rates until they have confidence that inflation is trending toward its 2% goal, adding that this year's inflation data “has not given us that greater confidence.”
<p> During his press conference, Fed Chair Jerome Powell said they would decide monetary policy “meeting by meeting,” while adding that slowing the pace of balance sheet runoff “will ensure a smooth transition for money markets.” He added the Fed’s belief that monetary policy is sufficiently restrictive to curb inflation and disregarded the potential of hiking rates when he asked. Earlier, the Federal Reserve opted to maintain the federal funds rate at 5.25%–5.50%. In their statement noted that the risks associated with achieving the Fed's dual mandate, which focuses on employment and inflation, have become more balanced over the past year. Despite acknowledging progress on inflation, they also recognized that recent data suggest this progress has stalled. Additionally, Fed policymakers announced a significant change to their balance sheet policies. Starting in June, they will reduce their monthly reduction of holdings in US Treasury securities from $60 billion to $25 billion, signaling a shift in their approach to balance sheet normalization.</p>
