Gold Up in Response to Hawkish Fed Pivot

Hawks are policymakers and advisors who favor higher interest rates to keep inflation in check. The opposite of a hawk is a dove, who prefers an interest rate policy that is more accommodative in order to stimulate spending in an economy. Depending on the state of the U.S. economy, policymakers may shift between a hawkish or dovish stance.

A hawk generally favors relatively higher interest rates if they are needed to keep inflation in check. In other words, hawks are less concerned with economic growth and more focused on the potential of recessionary pressure brought to bear by high inflation rates.

As of Thursday 16th of December 2021 , Gold was up on Thursday morning in Asia, with the dollar weakening after the U.S. Federal Reserve announced that it would quicken its asset tapering and hike interest rates in its latest policy decision.

Gold futures were up 1.00% to $1,782.15 by 11:25 PM ET (4:25 AM GMT). The dollar, which normally moves inversely to gold, edged down on Thursday.

The yellow metal clawed back up after an initial decline of almost 1% to a two-month low after the Fed handed down its policy decision on Wednesday. It will accelerate its asset tapering program to $30 billion per month. It also left its interest rate unchanged at 25% but project three quarter-point interest-rate increases in 2022, another three in 2023, and two more in 2024.

While In the central banks new economic projections, the central bank expects inflation to run at 2.6% in 2022, compared with the 2.2% projected in September 2021. Statement was made that,

“The market was looking for a hawkish move from the Fed and they got it in the dot plot,” precious metals trader Tai Wong told Reuters.

“The market is happy that the Fed is a little spooked and doesn't want to be too far behind the curve. For gold, the key technical level is $1,750; a break substantially below that could lead to a rout in the waning days of the year.”

Other investors also remained optimistic.

“The risk that the economy could fall into recession in 2023 does not seem so unreasonable. Golds weakness could be near its end as the Fed will be on autopilot until the March policy meeting,” OANDA senior market analyst Edward Moya told Reuters.

Other central banks due to hand down their policy decisions within the week include the European Central Bank, the Bank of England, and the Bank of Japan. In other precious metals, silver gained 0.6%, while platinum edged down 0.2% and palladium slid 1.3%. More trading news can be found at Ubanker official website.