The price of gold has once again exceeded 1,750 dollars an ounce, its highest in the last two weeks. It resulted from Jerome Powell’s speech and the monetary policy measures adopted by the Federal Reserve. The central bank chairman has confirmed that, for the moment, there will be no increases in interest rates.
The Fed believes that the US economy’s recovery is being faster than expected. No further rises in interest rates are in sight until at least 2023, despite improved expectations and rising inflation.
Indeed, as everyone expected, the meeting of the FOMC concluded with the decision to keep interest rates close to zero for short-term loans and to continue with the asset buyback program. The Fed is acquiring bonds worth more than $120 billion a month through it.
Fed’s outlook on the economy
The Committee believes that economic activity and unemployment have recently improved. However, the sectors most affected by the pandemic continue to show signs of weakness. The inflation remains below the 2% barrier.
The Fed expects US GDP to grow 6.5% in 2021, a rate that will decline in subsequent years. In any case, it is a higher proportion than the estimated growth of 4.2% that had been foreseen after the meeting last December.
Looking ahead to the next few years, the Federal Reserve estimates that growth will be 3.3% in 2022 and 2.2% in 2023, before settling around 2.3%.
In addition to the increase in GDP, committee members expect unemployment to fall from 6.2% to 4.5%. It is lower than the 5% estimated in December.
The unemployment rate will drop to 4.2% in 2022 and 3.7% in 2023 before stabilizing at around 4%.
Turning to inflation, the Committee expects it to rise to 2.2% in 2021, driven by higher consumer spending. In 2022 it will fall to 2% and will rebound to 2.1% in 2023, with the long-term target set at 2%.
Precious metals react to the upside
The price of gold reacted higher to the conclusions of the Fed meeting. A lesser influence of the refuge factor due to the US economy’s good evolution limited the increase. Even so, the spot price reached $1,755.25 an ounce, its highest level since March 1.
Palladium rose 1.5% to $2,606.47 an ounce, continuing the rally started in March last year. Russia’s Nornickel, the world’s largest palladium producer, announced that the palladium production would be reduced during 2021 due to the temporary closure of two of its mines. It has been a determining factor for the rise.
The silver rose 0.4%, to $26.44 an ounce, while platinum also increased by 0.4% and trading at $1217.78 an ounce.