Powell's testimony is considered less hawkish. This made the price of gold soar as investors switched from the US dollar to gold.
Gold prices jumped 1% after the US Dollar responded to Jerome Powell's testimony with a weakening. The Fed Chair's speech did not come as a surprise, disappointing investors who were expecting a hawkish statement. XAU/USD also jumped 1.08% to $1820.17, returning to its highest level since November 22.
Spot gold rose 1% to $1819.58 an ounce, in line with New York's Comex gold futures prices rose 1% to $1818.50. "The fact that Powell is not more hawkish than expected, is likely to make the gold market a bit more bullish," said Jim Wyckoff, analyst at Kitco Metals.
In testimony before the US Senate Banking Committee, Powell said that policymakers are still discussing approaches to reducing the balance sheet. The US inflation rate is considered to be well above the target, but it still needs careful consideration to implement more restrictive policies.
The US economic recovery recovered faster and even remained strong despite the emergence of the Omicron COVID variant infection. Unfortunately, this strengthening is still followed by an increase in inflation due to a surge in demand that is not balanced with the availability of goods. "We know that high inflation costs money," Powell said in his opening remarks.
Powell's statement made the US dollar weaken while gold prices rose. "Gold prices rose as bond yields rally stalled following Fed Chair Powell's signal to start normalizing policy this year," said Ed Moya, senior market analyst at broker OANDA.
Next, the market's focus will be on the US CPI data to be released tomorrow. The US CPI is expected to rise from 4.9% to 5.4% on an annualized basis. Peter Mooses of RJO Futures said that the economic uncertainty related to the pandemic and the widespread volatility in the market would likely contribute to adding to the rise in gold prices.
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