Gold prices are lower on Thursday a day after the U.S. Federal Reserve hiked its benchmark interest rate as anticipated. The central bank has lifted rates three times in 2018 and is on track to do so once more at the end of its December monetary policy meeting.
Investors were focused on the words from Chair Jerome Powell. The Fed chief did not deviate from the script that other Fed members have stuck to. The central bank is data dependant and will act when needed. Despite questions on trade turmoil, he dismissed the topic as not part of the responsibility of the Federal Reserve.
The Fed has been the target of the Trump administration for hiking rates, but questions from the financial press on the subject were an opportunity for Powell to make clear the Fed is independent from the White House.
The rate hike was already priced, but a hawkish statement was balanced with some dovish projections. Powell’s style of communication did also support a rise in the dollar even though the market was expecting the monetary policy move. Jerome Powell uses a more direct and conversational tone when addressing the press without falling into the traditional economic theory answers.
The release of the final US GDP for the second quarter put downward pressure on the yellow metal. The pace of growth was confirmed as strong in the US and validates the more hawkish views within the Federal Open Market Committee (FOMC).
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Alfonso Esparza
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
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