AGE Daily Gold Update

AGE Daily Gold Update presents a recap on today's action in the precious metals markets. View archives.

3/22/2023: Gold surges after dovish Fed

Source: Bill Musgrave, American Gold Exchange

Austin — Gold gained 0.4% to close the session near $1,950 ahead of the Fed's decision to raise interest rates by a quarter-point. The metal then surged above $1,980 in electronic trading as the dollar and bond yields fell on the central bank's dovish pivot on future hikes.

As widely expected, the Federal Reserve voted to increase its benchmark rate by 25 basis points to between 4.75% and 5%. Before the recent bank failures, triggered in part by the most aggressive rate-hike cycle in 40 years, an increase of 50 basis points was seen as likely.

Less expected was the dovishness turn in the post-meeting messaging. The Fed's statement said "some additional firming may be appropriate" to meet inflation goals. This replaced language in previous statements that "ongoing increases" would be needed.

The Fed's so-called dot plot forecast for the funds rate, which it revises every three months, now shows only one more hike this year, down from two in the last statement.

While the central bankers acknowledged inflation will not come down as quickly as expected, their new economic forecast projects a sharper slowdown in growth this year. They also admitted that recent bank turmoil will "weigh on economic activity."

Benchmark 10-year Treasury yields pulled back under 3.5% on news of fewer rate hikes this year, and rate-sensitive 2-year yields plunged under 4%. Lower yields boost gold by decreasing the opportunity cost for holding it instead of bonds as a safe-haven asset.

The dollar dumped nearly 1% against major rivals, supporting gold and other commodities by making them cheaper overseas.

The other precious metals were also higher, with silver rising 1.6% while platinum and palladium climbed 1.1% and 4.5%, respectively.

At the Comex close: April gold gained $8.50 to $1,949.60; May silver rose 36 cents to $22.79 per ounce, then added another dime after the Fed; April platinum picked up $10.30 to $987; and June palladium for climbed $62.60 to $1,445.70 an ounce.