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  • Writer's pictureanalysiswatch

Title: Gold Up, Fed Hikes Interest Rates but Remains Within Expectations

May 05, 2022 01:01AM ET

By: AnalysisWatch

Gold prices rose Thursday morning in Asia after the U.S. Federal Reserve raised interest rates in its latest attempt to curb inflation. The Fed highlighted inflation as a risk to the economy while ruling out major rate hikes for the rest of 2022.

Gold futures rose 1.76% to $1,901.67 an ounce by 12:57 AM ET, after rising 1% earlier. The dollar, which usually moves inversely to gold prices, rose slightly on Thursday but remained near the one-month low reached in the previous session.

In its decision on Wednesday, the Federal Reserve raised its benchmark interest rate to 1%, the largest increase since 2000. Fed Chairman Jerome Powell said the 75 basis point super hike feared by investors is "not something the committee is actively considering," adding that policymakers see the "neutral" level of the benchmark rate at 2% to 3%.

Powell also appealed to Americans struggling with high inflation to be patient while policymakers take tough measures to bring it under control. He also said the Fed has ruled out a three-quarter percentage point rate hike at the central bank's upcoming monetary policy meetings for now.

Gold, often seen as a hedge against rising costs, rose 1% in the previous session after Powell's statement.

U.S. Treasury yields also fell sharply on Wednesday, giving a boost to the yellow metal.

Later in the day, the Bank of England will announce its monetary policy decision. Elsewhere, the Caixin Purchasing Managers' Index for China's service sector came in at 36.2 in April 2022.

In other precious metals, silver rose 1.1%, platinum gained 0.6% to $997.19, and palladium rose 0.8%.

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