Gold Prices Soar Even though The Fed Accelerates Tapering

Gold prices skyrocketed more than 1% after the announcement of the Fed's tapering acceleration. The US central bank's policy was anticipated by the market so that the US dollar weakened.

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Gold prices soared, taking a gap from the weakening US dollar after the announcement of the Fed's monetary policy yesterday. In Friday's trading session (17/December) this morning, XAU/USD was up 1.26% at $1799.04, the highest level since November 23.

Meanwhile, spot gold prices rose more than 1% to $1795.41 per ounce, in line with the price of gold futures on the Comex in New York which rose 1.9% to $1798.20.

The US Dollar Index slumped on profit-taking after the announcement of the results of the FOMC meeting. In a policy statement, Fed Chair Jerome Powell said that policymakers (FOMC) agreed to reduce bond purchases to $30 billion per month. This amount has doubled from the previous tapering rate of $15 billion per month.

The US economy is said to no longer need the support of loose policies and the inflation rate is already very high in Powell's view. Even the most dovish Fed officials agreed to start moving away from accommodative policies. The market views the statement as further smoothing the Fed's move to raise interest rates in 2022. Expectations have also increased from two to three interest rate hikes next year.

The market has been anticipating long ago

Gold prices will generally be pressured by issues that support an increase in interest rates. But this time, the precious metal actually rose due to the decline in the US Dollar. According to analysts, the prospect of a rate hike was well anticipated before the Fed's announcement, so the market is currently likely to take advantage of the Long Dollar positions that were already opened before the Fed announced its policy.

"The market has almost four weeks to absorb the Fed's shift in strategy (since Powell stopped talking about temporary inflation and became more hawkish). So this time (gold) is really ready for it," said Rhona O'Connell at StoneX.
Previously, he also stated, "Apart from the weakening of the US Dollar, there are several supporting elements for gold, including geopolitical issues and the impetus for increasing demand for physical gold."