Gold Prices Climb After Fed Policy Decision

Plus500 | Thursday 18 March 2021

Gold (XAU) jumped 0.8% yesterday after the U.S. Federal Reserve agreed to keep almost zero percent interest rates until 2023, followed by a 0.6% drop this morning. Barrick Gold (GOLD) also welcomed the announcement yesterday, rising 1.9% and Silver (XAG) climbed 1.5%.

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Despite the mounting inflation concerns in financial markets, the Federal Reserve has reinforced its pledge to support the United States’ economy as it struggles to continue its recovery from the coronavirus pandemic. The central bank also upgraded its GDP outlook, with growth expectations of 6.5% in 2021, before leveling off.

Following the unprecedented Federal stimulus in 2020, Gold prices have seen a 22% increase this year, appealing as a hedge against inflation.

U.S. Indices React to Fed's Announcement

Gold and Silver were not the only market movements that experienced a positive reaction following the Fed’s announcement. Some U.S. indices also reached new highs after the policy decision on Wednesday.

The Dow Jones (USA 30 Wall Street) rose 0.5% and the S&P 500 (USA 500) almost touched 0.3%, both on Wednesday. This uptrend could have also been due to economic optimism amid the $1.9 trillion spending stimulus and coronavirus vaccine rollout. 

However, there are concerns that the spending stimulus may overheat the still-recovering US economy. Coupled with general economic uncertainty aggravated by the pandemic, the Federal Reserve maintains that the economic outlook is still somewhat unclear.

Gold, Silver and some U.S. indices welcomed the Federal Reserve's new policy decision. However, it remains to be seen if these markets will continue the uptrend, or fall in the coming months.

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