The US Federal Reserve (Fed) in today's (20th) Federal Open Market Committee (FOMC) meeting decision, as expected by the market, kept the policy interest rate unchanged at 4.25%-4.5%, and announced that it will slow down the balance sheet reduction from April. The latest dot plot also shows that officials maintain the expectation of two rate cuts in 2025.
Fed Chair Powell emphasized in the post-meeting statement that the US economy remains strong overall, with the current monetary policy in a "restrictive" state to curb inflation, but it can also be adjusted flexibly if the labor market weakens or inflation declines rapidly.
He also stated that surveys show signs of a slowdown in consumer spending, and the Fed will closely monitor signals of a weakening real economy, and pointed out that the progress in fighting inflation may face delays this year, partly due to the tariffs and various policies of the Trump administration, which have increased inflation and economic uncertainty, and the policy effects are still to be observed.
Gold hits a new all-time high! Stocks rise across the board, market divided
After the Fed again paused its rate hike cycle, spot gold prices surged to $3,056 per ounce this morning, setting a new all-time high again in a short period of time, and have since retreated to $3,050. So far this year, it has risen more than 16%.
However, at the same time, US stocks and cryptocurrencies, as risk assets, have also risen in sync, indicating a bipolar market reaction to the short-term tendency towards safe havens and risk assets. Experts analyze this as follows:
The market has seen a rare situation where both the stock market and gold have seen significant gains after the Fed's FOMC, which means that those who can bear the risk are betting that the situation is good and are buying stocks, while those who cannot bear the risk are betting on the increased uncertainty and are buying gold.
Fed Chair Powell's statement did not fully allay market concerns, and the financially conservative will see the Fed's statement as one of the uncertainties of the Trump era.
When the market is divided, it is difficult to determine which is correct, and there may be a rebound or a correction later.
Expectations of rate cuts drive the gold frenzy
Reuters on Thursday cited independent metal trader Tai Wong's comment stating: "Gold hit a new high after Powell's remarks, with gold prices soaring to a record high, stock and bond prices also rising, gold prices strongly surging above $3,000, and currently in a bull market, as increased uncertainty and concerns about rising inflation will continue to drive gold prices higher."
Gold, as a hedge asset and non-yielding asset, is more attractive in a low-interest-rate environment, so the market's expectations of rate cuts will further stimulate investors to buy gold. Fed fund futures show the probability of a rate cut by the Fed in June has risen from 57% to 66%.
Taiwan Bank's gold market report on the 19th pointed out that the factors driving the influx of large amounts of funds into the gold market include the renewed Middle East conflict after Israel's airstrikes on the Gaza Strip on Wednesday, rumors that Putin will call for a ceasefire and stop providing military weapons to Ukraine, but the EU does not agree with this proposal, and the US Treasury Secretary's statement that each country will receive a tariff code on April 2, which is worrying the market and may disrupt the global economy.
