A Wednesday update from the Federal Reserve has boosted the long term strength of gold – while also signifying there is a window to buy open right now if you act fast.
The Federal Reserve Chairman, Jerome Powell confirmed that there would be no increase in interest rates until 2024, signalling that the economic road to recovery post-pandemic will be a marathon not a sprint, even as the vaccine roll out continues to progress around the world.
Powell said, “We think the stance of monetary policy remains appropriate. We are committed to maintaining that patient accommodative stance until the job is well and truly done.” This accommodative monetary policy bodes well for gold and is a boost for the long term strength of the precious metal over the course of the next three years.
At the same time, Powell also created an opportunity to buy by declining to take action against the rapid increase in 10-year bond yields. Having risen over the course of the last few weeks, the yields hit a 13-month high yesterday (Thursday) which places short term pressure on gold prices. Of bond yields, the Federal Reserve chair said that he wasn’t concerned, noting “I would be concerned by disorderly conditions in markets or by a persistent tightening of financial conditions that threaten the achievement of our goals.” His comments have been taken by some analysts to suggest that yields could go higher before they return to their normal levels.
Credit Suisse said, “Gold maintains a top below £1,267.05 ($1,765.61), and with real yields and the USD expected to strengthen further” – suggesting that there will be a chance to buy on the dip for those able to act quickly and take advantage of the lull in the bull run before the longer term factors kick back in to take gold higher once again.