Gold prices had a particularly volatile day today. Initially rising a little bit, prices for the precious metal ended up falling in response to comments from the Federal Reserve that more aggressive rate cuts won’t be coming on the horizon.
Overall, gold ended the day down by 1.2 percent, losing $16.5 and dipping back down to $1,409.59 per ounce and giving back the past two weeks worth of gains.
Federal Reserve Chairman Jerome Powell spoke today at a press conference where he said that the U.S. economy has been showing signs of resilience and that the Fed’s decision to lower their rate from 2.25 to 2 percent won’t be the start of a new trend of rate reductions.
Instead, he said that the decision, which policymakers voted on with only two officials dissenting, was meant to help mitigate the possible downside of a weakening global economy. This also included other considerations, such as the ongoing China-U.S. trade negotiations that could further unravel in the future, alongside the impact that further tensions in the Gulf of Hormuz would lead to.
Throughout the past couple of months, gold has benefited significantly as central banks signaled that they would ease up on their monetary policy. Back in 2018, central banks around the world were on a gold buying spree, reaching a record level of purchases that signaled to savvy investors that confidence in the dollar might be weakening.
Gold prices ended up reaching a six-year high this month, peaking at $1,429.70 per ounce before giving back much of those gains in response to today’s news.
“Gold is not liking the fact of that one comment by him — that this is not the start of a long-term cycle of cuts,” Bob Haberkorn, senior market strategist at RJO Futures in Chicago, said by phone according to Mining.com. However, gold bulls are still quite optimistic about the future price of gold despite today’s dip. Peter Schiff, a well know financial figure and CEO of Euro Pacific Capital, spoke in an interview for Kitco News that he sees the prices for the precious metal surging well into the $5,000 price range. “I do think that this is the beginning of the breakout of the consolidation that we’ve been in for the last several years, but ultimately I think gold’s going to go quite a bit higher than $5,000,” he said, adding that governments around the world are creating inflation and this will drive the price of gold up in the long run.
So far, gold has been among the best-performing commodities in recent months, with prices having gone up by 16 percent over the past year. Historically, the precious metal has stayed below $700 per ounce between 1970 to 2007, before rising to $1,100 by 2010.
While investing in gold might not have given you as much returns as much as investing in a major index like the S&P 500 over the past decade, the truth is that as the economic consensus shifts from a continued expected bull market to a possible recession near the future, gold investors are unlikely to get burnt should that turn out to be the case.
