The Fed Makes Gold Prices ‘Climb The Mountain’, Time to Buy?

Jakarta, CNBC Indonesia – The central bank of the United States (US) or known as the Federal Reserve (The Fed) announced monetary policy early this morning, which resulted in an increase in world gold prices. Prior to the announcement, gold prices actually weakened 0.38%, but then reversed higher and ended trading at US$ 1,809.41/troy ounce, up 0.45%. Antam’s gold price has also risen 0.5% today.

The strengthening of world gold continued on Thursday (29/07/2021), at 17:13 WIB gold was at US$ 1,822.74/troy ounce, up 0.88%. Gold is now starting to “climb the mountain”, but could it peak at US$2,072/troy ounce again?

Photo: Data wrapper

In line with market forecasts, the Fed maintains interest rates at 0.25%, and the asset purchase program (quantitative easing/QE) worth US$ 120 billion.

But that’s not what market participants are waiting for, but when the Fed will do it tapering or a reduction in the value of QE.

Tapering is the main enemy of gold. Reflecting on history, tapering was carried out in 2013 and the gold price was in a downward trend until early 2015 when it touched the lowest level of US$ 1,045/troy ounce. During this period the world gold price fell by about 25%. Even if you look at the record high at the time of 1,920/troy ounce on September 6, 2011, the price fell by more than 45%.

However, early this morning, the Fed has yet to provide details on when the tapering will take place.

The Fed sees the US economy getting stronger, but still needs to see further substantial progress, particularly for the labor market and inflation, before starting tapering.

“We’re taking the most transparent approach possible. We haven’t made any further substantial progress,” Fed chairman Jerome Powell said, as quoted by CNBC International, Thursday (29/7/2021).

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Meanwhile for the labor market, Powell said it still needs to be even stronger, before starting tapering.

“I’d like to see a stronger labor market in the next few months before starting to reduce QE which is currently $120 billion per month,” Powell said.

As a result, the price of gold began to climb, although there has not been a big spike.

NEXT PAGE >>> Tapering Will Happen, It’s Just a Matter of Time


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