Thursday (April 29) sub-session, the dollar index extended the decline, is now trading around 90.45; Spot gold continues to pull up short – term, gold is approaching $1790 / ounce mark. The U.S. Federal Reserve left interest rates unchanged on Wednesday and dovish comments from Fed Chairman Jerome Powell, who said it was “premature” to talk about tapering bond purchases, hit the dollar hard and sent gold prices sharply higher. On Thursday evening in Hong Kong time, investors will get U.S. GDP data, which is expected to trigger another bout of market volatility.
The dollar weakened on Wednesday on the dovish tone from the Fed, with the dollar index ending at 90.61 after hitting as low as 90.55. Thursday sub-market intraday, the dollar index continued to slide, as low as 90.44.
Gold continued its strong rally, buoyed by a weaker dollar. Gold closed Wednesday at $1781.68 an ounce, up sharply from the session’s low of $1762.52. Gold extended gains in Asian trading on Thursday, reaching as high as $1,789.41 an ounce, a new one-week high.
The Federal Reserve left its benchmark interest rate unchanged at 0 to 0.25 percent on Wednesday, keeping its $120 billion monthly asset purchase program unchanged, as expected. The Federal Reserve reiterated its commitment to using a full range of tools to support the U.S. economy, thereby promoting the goal of maximum employment and price stability.
“Indicators of economic activity and employment have strengthened with progress in vaccination and strong policy support,” the Federal Open Market Committee said in a statement. The sectors most adversely affected by the pandemic remain weak but have shown improvement. “The rise in inflation mainly reflects temporary factors.” “Risks to the economic outlook remain,” the Fed said.
Fed Chairman Colin Powell held a news conference after the central bank left interest rates unchanged. Mr Powell said the economy was still a long way from its employment and inflation targets. The recovery remains uneven and incomplete, and it is likely to take some time before substantial further progress is made; Economic activity has only recently picked up and it will take some time for that to happen.
On inflation, Powell said no one should question the Fed’s determination to control specific inflation and that one-off price increases are unlikely to lead to sustained inflation.
Powell also said a good jobs report doesn’t mean it’s time to start talking about tapering. “This is not the time to start talking about austerity,” Powell said. We will let the public know in advance. It will be some time before we see substantial further progress. We had a great jobs report. It is not enough just to start talking about tapering. We need to see more data.” The comments hit the dollar and sustained a rally in gold prices.
FXStreet currency analyst Yohay Elam said some dovish comments from Fed Chairman Colin Powell have weighed on the dollar and could put further pressure on the greenback.
Jeff Klearman, portfolio manager at GranitesShares in New York, said the FOMC, as expected, kept interest rates on hold and continued to buy back securities known as Treasurys and mortgages, but the Fed will continue to pursue quantitative easing to meet its employment and inflation goals.
Klearman said unprecedented monetary easing and heavy government spending will set the stage for gold bulls. Rising inflation fears, rising national debt and a weaker dollar will help gold rebound.
Tai Wong, head of metals derivatives trading at BMO, said: “Treasuries rallied, the dollar retreated sharply and gold rallied to the session high after testing the range low earlier. Powell has been at pains to stress that the Fed will not scale back its accommodative policies. The Fed’s comments could prompt gold to test the top of the $1,800 – $1,810 range, but it is unclear whether there is enough momentum to break out of that range without further dollar declines.”
According to Economies.com, gold initially faced bearish pressure on Wednesday and tested a key support of $1,765.00 an ounce. According to Economies.com, as gold rebounds above $1,783.00 an ounce, this will be a positive factor and will continue the bullish trend, with primary targets at $1,800.00 and then $1,838.00.