US Fed revives gold market

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Last week the Federal Open Market Committee published the minutes of its last meeting in March. From the whole text, some points can be highlighted which will directly influence the gold price in the coming period.


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All members of the committee noted the good economic indicators and became much more optimistic about the future improvement of the US economy. But they also pointed out a very important thing. Despite all the progress, Fed officials consider the current economic situation to be unsatisfactory and quite a few economic indicators are still far from the pre-pandemic level and the Fed’s long-term goals.
With these statements the Fed probably confirms that it is in no hurry to reduce quantitative stimulus and also that it has no plans to raise interest rates for several years. And just as importantly, the US Fed expects inflation to rise even more strongly. That is even more than their projected rate of 2.4% in 2021.
What does all this mean for gold? An increase in the actual rate of inflation combined with dovish Federal Reserve policy could create pressure on interest rates and the US dollar, supporting gold prices. Many market participants will hedge inflation risks by buying gold and other metals anyway.
After a terrible start to the year, the second quarter looks more optimistic for the gold market. A soft Fed policy creates conditions for long-term “weakness” of the US dollar, which will not immediately be reflected in the gold price, but could give a good long momentum after some time, but the decline of US Treasury yields is already giving good support to the yellow metal.

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