Gold prices increased 1.56% ($28/oz) to a one-week high of $1,817/oz, as markets respond to a dovish Fed response to monetary policy. U.S Treasury yields dropped 5.2% from a one-week high on Monday. Lower yields reduce the opportunity cost of holding non-yielding bullion.
The FOMC meeting on Wednesday, focused on discussing the monetary policy strategy for the U.S, concluded with no clear response from the Fed. Consequently, the U.S Dollar Index stumbled by1% after the dovish response. Fed chair Powell said in a conference meeting after the FOMC that the economy still has “some ground to cover” before the Fed consider starting tapering.
Powell was singing a new tune on inflation, moving away from a transitory inflation view to a more persistent view, stating in his remarks that inflation; “is expected to run certainly above our objective for a few months before we believe it’ll move back down toward our objective.” This indicates that inflation will be running higher in the coming months until the Fed decides to change its monetary policy.
The yellow metal was last seen trading at $1,817/oz.