029 April 2021

Mixed Signals and Conflicting Themes from the Fed

Gold prices increased 0,87% ($15/oz) from its five-day low as gold advanced on a subdued dollar, the Dollar Index decreased 0,67% from its five-day high, enhancing gold’s appeal for holders of other currencies.

After Chairman Powell’s speech at Congress, investors are still struggling to make sense of the mixed signals and conflicting themes from the Fed. Powell stated that the; “Fed won’t raise rates on fear of inflation”. Nonetheless, the main takeaway from the congress speech is that Powell highlighted that they have the tools to bring inflation down. However, Powell did not indicate how they plan to implement the tools successfully. 

Milling-Stanley, Chief Gold Strategist at State Street Global Advisors (SSGA), indicated a high probability that gold will exceed $2,000 by the end of 2021 – he is not convinced that the Fed will increase rates in coming years, even if inflation rises. The reason being that President Biden’s trillion-dollar infrastructure plan will increase the already high deficits, which will keep interest rates low.

The yellow metal was last seen trading at $1,777/oz.

Jaco Lups