(Bloomberg) — Gold rose to a new all-time high as policymakers projected slower growth and higher inflation after holding interest rates steady for a second-straight meeting on Wednesday.
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Chair Jerome Powell acknowledged Wednesday during a press conference that the high degree of uncertainty from President Donald Trump’s significant policy changes, though repeating that the central bank isn’t in a hurry to adjust borrowing costs. Officials can wait for greater clarity on the impact of those policies on the economy before acting, he said.
“Inflation has started to move up,” Powell said, “we think partly in response to tariffs. And there may be a delay in further progress over the course of this year.” The Federal Open Market Committee voted to keep the benchmark federal funds rate in a range of 4.25%-4.5%.
The dollar and Treasury yields pushed lower as Powell spoke at a press conference after the FOMC rate decision. That helped lift bullion by as much as 0.6% to a record $3,051.96, surpassing the previous peak hit on Tuesday.
“Clearly the market is projecting an easier monetary policy, as the Fed projects higher inflation,” said Bart Melek, global head of commodity strategy at TD Securities. Bullion typically performs well in a lower rate environment.
The decision to hold rates steady comes as Trump’s ambitious and frequently erratic policy agenda has placed the US economy, and the Fed’s ability to keep it on track, under increasing pressure. Trump’s ever-changing plans to levy tariffs on US trading partners have stoked fears of an economic slowdown and raised fresh worries over inflation — a combination that could pull policymakers in opposite directions.
Given the mounting uncertainty, “we believe that investors should have a 5% to 10% allocation in real assets, like commodities, gold, infrastructure, real estate, natural resources,” Michael Arone, chief investment strategist at State Street Global Advisors, said in an interview.
Bullion has climbed 16% this year, extending last year’s strong performance. Investors flock to the metal for safety amid gloomy outlook for both the US and global economy. Several major banks have raised price targets in recent weeks.
Spot gold rose 0.4% to $3,047.93 an ounce at 3:57 p.m. in New York. Silver, platinum and palladium fell.
