The gold market did not get much love from Fed Chair Jerome Powell as he dismissed bond yields and increasing inflation pressures.
Thursday, speaking to the WSJ Jobs Summit, Powell stated that while inflation is rising, he views it as transitory and a one-time thing. He went on to say that long-term interest expectations are well founded at 2%.
Powell also dismissed the increase in bond yields and said that it does not signal that the Fed will raise interest rates anytime soon.
Yields for 10-year Treasury have gone higher after Powell’s remarks, which are pushing gold prices under critical support near $1,700 per ounce. April gold futures last sold at $1,696.70 per ounce, down by 1% on the day.
According to analysts, Powell’s statements on bond yields might continue to be bad for gold prices. He said it would take more than just a bond yield rise for the bank to adjust its policy. While the bond yield rise got his attention, he stated that monetary policy is not founded on just one number.
“I would be worried with disorder in the economy or tightening. It’s not just about one price,” he said.
According to some analysts, Powell did not give any new data on forward guidance regarding policy or outlook.
He repeated his outlook that the Fed is far from its goal of reaching maximum employment and average inflation of over 2%.
Looking at labor, Powell stated it would take more than just low unemployment to mean full employment.
Although Powell was fast to dismiss increasing inflation, some analysts stress he is not in a rush to increase interest rates, which would give gold some support.
Powell stated that he had two lessons from pandemic induced economic downturn that began last year: “When we have a genuine crisis, act fast and do not hold back and do not stop until the job is complete.”