(Kitco News) In just 24 hours, gold managed to lose nearly $100 after the Federal Reserve signaled higher inflation and updated its dot plot projections, showing a possibility of two rate hikes as soon as 2023.
The news triggered a surge in the U.S. dollar and a rise in the 10-year U.S. Treasury yield, which weighed heavily on gold. The precious metal’s plunge was intensified by technical selling as gold tumbled below the $1,800 and came close to testing critical support at $1,770-60.
The market zeroed in on the upward revision to the PCE inflation forecast for 2021, which was raised a full percentage point – from 2.4% in March to 3.4%. This comes after very strong inflation readings in April and May.
During the press conference, which followed the Fed statement on Wednesday, Fed Chair Jerome Powell tried to reassure the markets that the central banks’ dot plot, which showed that two rate hikes are possible as early as 2023, should be taken with a “big grain of salt.”
He stated: “We did not have a discussion whether a lift-off is appropriate at any particular year. It is too early to talk about that. The dot plot is not a great forecaster of future rate moves.”
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