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Wednesday’s Federal Reserve meeting has ignited fresh movement for gold, sending the yellow metal above the key pricing level of £1,353 ($1,800) in overnight trading. It was trading at £1,359 ($1,807) in the early hours of this morning as the European markets opened.

This fresh momentum for gold comes on the back of comments made by the Federal Reserve Chair, Jerome Powell. Observers noted that the Federal Reserve appears not to be as hawkish as it seemed to be leaning prior to this week’s regular meeting. Powell confirmed that the Fed will double its pace of tapering, up to £22.5 billion ($30 billion) after assessing the present economic performance, wages and inflation levels in the USA. Importantly for the longer term price of gold, the Chair also confirmed what everyone else has been saying for a while now; inflation is running persistently hot and it is expected to continue to rise through 2022.

He said, “There is a real risk now that inflation may be more persistent, which may put inflation expectations under pressure. Risks of persistent inflation have increased — that’s the reason behind our move today. We are prepared to use our tools so that higher inflation doesn’t get entrenched.”

Three rate increases have also been pencilled in for 2022, with each at a quarter point, though Powell was at pains to point out that these increases are dependent on the Federal Reserve’s full employment goals being met.

He explained, “The unemployment rate [is projected] to decline to 3.5% by the end of the year… while inflation will run above our 2% goal well into next year. Price increases have now spread to a broader range of goods and services. The post-pandemic labour market will be different. The maximum level of employment evolves over time. The important metric that has been disappointing is the labour participation rate. That return to higher participation will take longer. We don’t have a strong labour participation recovery yet. But we have to make policy changes now with inflation above our target.

“Buying assets is adding accommodation, raising rates is removing accommodation. Since we’re two meetings away from completing the taper, assuming things go as expected, if we want it to lift off before then, we would stop the taper potentially sooner. But it’s not something I expect to happen. One of the complications is we have to make policy in real-time. You have to make an assessment of what is the level of maximum employment that is consistent with price stability in real-time. What does the labour market look like in the world without COVID? That is something we’d like to see. But that doesn’t look like that’s coming any time soon.”

With gold on the ascent, now is the time to act. Buy now.

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