With Powell reinforcing their dire assessment of the country’s economic prospect for the coming years, safe-haven assets could continue to rise. Long gold?

  • The Federal Reserve kept interest rates unchanged at near 0%, as widely expected.
  • In addition, they will continue to buy bonds, targeting at USD80 billion a month in Treasuries and USD40 billion in mortgage-backed securities.
  • Fed chairman Powell stated that rates will remain low until 2022 and projected the economy to shrink 6.5% in 2020 with unemployment rate at 9.3%.
  • However, the Fed is optimistic with the future as they expect GDP to rise 5% in 2021 and 3.5% in 2022.
  • Powell laced his message last night with pessimism, saying that there is still a lot of risk in the economy.
  • We believe that the US stock futures will continue to rise with Fed’s commitment to support the economy and smooth functioning of the financial markets.
  • Furthermore, Mr Powell suggested there was a greater likelihood that the Fed would take further action to bolster the US economy if it falters more than expected – either because of a second wave of Covid-19 infections, or an underwhelming next round of fiscal stimulus.
  • With unlimited QE still in place, dollar will be pressured while US stock future growth will continue to be speculative. We would place our bet on gold riding into the uncertainties in the near future.
  • XAU/USD(Gold) could move higher towards 1765 in the months to come.
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