The Federal Reserve concluded a two-day monetary policy meeting on Wednesday, which was the central bank’s third interest rate meeting of the year and the third time it announced that it would keep the current interest rate level unchanged.
Right now, the U.S. federal fund interest rate remains in the range of 4.25 per cent to 4.5 per cent, in line with consensus expectations.
Federal Reserve Chairman Jerome Powell said the direction of the tariff policy brings a great deal of uncertainty, and when the tariff policy is determined, the impact on the economy, growth and employment is yet to predict. Powell argued that U.S. growth is particularly difficult to assess, which puts the central bank in a wait-and-see position now.
Powell noted that the labour market is solid and inflation is low, so there is no real cost to the Fed’s wait-and-see policy at this stage. After Powell’s speech, the CME’s ‘Fed Watch’ tool showed that the probability of a Fed rate cut in June fell to 19.8 per cent, compared with 31.9 per cent the day before. The next Fed meeting is scheduled for 17-18 June.
Gold prices fell to $3,371.86 an ounce from an intraday high of $3,400 an ounce after the Fed statement was released. Silver prices were traded at $32.28 an ounce at 3:30 p.m. ET.
Bank of America Corp. precious metals team said in a report published Wednesday that gold is increasingly likely to reach $4,000 an ounce in the second half of this year. In March, the team had predicted that gold prices would reach $3,500 in 2027, and the precious metal reached that goal in less than a month.
Analysts note that a specific set of conditions must be met for gold prices to reach the $4,000 target, including increased investment in gold and steady demand for jewellery. Meanwhile, geopolitical uncertainty triggered by global trade policies and concerns about the U.S. government’s fiscal outlook are two key factors supporting gold prices. As the dollar’s safe-haven appeal declines, gold could end up being a less risky investment.
Tariffs are an integral part of Trump’s policy toolkit, the report said, and tariffs will affect inflation expectations, which will put the Fed in a dilemma. With economic activity decelerating, along with real interest rates continuing to remain low, this also provides support for gold.
Analysts at Bank of America believe that the price of gold is expected to move towards $4,000 after the summer. However, in the short term, gold is very comfortable above $3,000 per ounce in terms of current liquidity conditions, but over $3,500 still requires new catalysts, with strong support at $3,200.
