Gold Lingers Around $1300 Levels

COMEX Gold futures are lingering around the psychological barrier of $ 1,300 an ounce after the US Federal Reserve indicated that it will hike interest rates more aggressively this year and the next as the US economy continues to grow at an impressive pace. Following its two-day monetary policy meeting, the Federal Reserve raised interest rates by 25 basis points Wednesday. The federal funds rate is now within a range between 1.75% and 2.00%.

Gold traders saw the underlying message from the Fed announcement as supportive for the yellow metal, thereby pushing up the metal after the statement. The median average of the central banks updated forecasts called for interest rates to end the year around 2.4%, up from Marchs projection of 2.1%. The forecasts suggest the Fed will raise interest rates two more times this year. Interest rates are expected to increase to 3.1% next year, up from the previous estimate of 2.9%. The Fed is looking for interest rates to rise to 3.4% by 2020, unchanged from the previous projections.

Fed was generally hawkish as it noted that the economic activity has been rising at a solid rate. The central bank now expects the U.S. gross domestic product to grow by 2.8% in 2018, up from Marchs forecast of 2.7%. Economic activity is projected to expand 2.4% in 2019, unchanged from the previous forecast. And the economy is expected to grow 2.0% in 2020, unchanged from the previous estimate.

The Fed also sees further declines in the unemployment. The rate is estimated to fall 3.5% next year, through to 2020, down from the previous forecast of 3.6%. The inflation expectations are slightly higher this year compared to Marchs forecast of 1.9%. All in all while the Gold market seems comfortable with the current stance of the Fed, more clarity has to emerge on inflationary front for the metal to break convincingly above $ 1300 per ounce levels.