Fed’s Golden Outlook On The U.S. Economic Conditions Dragged Gold In The International Market

  • May 02, 2019 AEST
  • Team Kalkine
Fed’s Golden Outlook On The U.S. Economic Conditions Dragged Gold In The International Market

Gold prices plunged in the global market; Federal Reserve held the interest rate steady.

The Gold spot fell over the FED stance to keep the interest rate steady; the prices dropped from the level of $1287.28 (Day’s high in 1st May 2019) to the present level of $1271.35. The FED Chair, Jerome Powell, jettisoned the demand of the United States president Donald Trump to increase the interest rate and has held the interest rate unchanged.

FED mentioned that the robust economic growth coupled with strong employment in the United States would boost up the economic conditions and help it revive from the weaker inflation. The golden outlook of the Federal Reserve towards the United States economic conditions removed the shine from gold, and the prices dropped significantly.

The Federal Reserve decreased the IOER (interest paid on excess reserves) to 2.35 %, as compared to 2.40% previously. However, the members of the Reserve cleared that the decision to decrease the IOER is in line with the Fed’s aim to keep the funds' rate in the target zone and it does represent any shifting from the current monetary policy.

The betterment in the non-farm employment supported the dollar prices and the prices recovered from the recent low of 97.15 (Day’s low on 1st May 2019) to the present level of 97.60. The recovery in dollar prices further exerted pressure on gold prices and the prices witnessed a substantial drop on an intraday basis.

The bond yield-to-maturity or the market discount rate on the U.S-10-year bond rose from the level of 2.459% to the present level of 2527%, which in turn marked an increased return expectation of market participants from other assets and exerted pressure on gold. The increase in market discount rate signified improved risk appetite of the market participants, which in turn, led to a sell-off in the less risky non-interest-bearing asset gold.

Majority of the gold miners on the Australian Stock Exchange traded on a negative note over the plunge in gold prices.

Miners such as Aurelia Metals, De grey, plunged during the day’s session on ASX.

Aurelia Metals Limited (ASX: AMI) dropped after starting the day’s session at A$0.665, the prices dropped to the level of A$0.605 and ended at the day’s low of A$0.605, down by 18.79% as compared to its previous close.

De Grey Mining Limited (ASX: DEG) followed the footprints of Aurelia Metals, and the prices fell substantially to mark a day’s low of A$0.085 after commencing the day session at A$0.087. The share prices of the company ended the day’s session at A$0.087, down by 4.40% as compared to its previous close.


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