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Gold prices climbed more than 1% on Thursday after US Federal Reserve chair Jerome Powell ruled out large, aggressive interest rate hikes for the year as the central bank seeks to contain inflation without triggering an economic recession.

Rate hikes tend to lift bond yields and make zero-yield bullion less attractive by raising its opportunity cost. Gold, which is also perceived as an inflation hedge, is now up for a third straight session in what could be its best winning streak since mid-April. Spot gold was up 1.1% at $1,901.56/oz, as of 3.30am GMT, after rising to its highest level since April 29 earlier in the session. US gold futures gained 1.8% to $1,902.00.

The Fed on Wednesday raised its benchmark overnight interest rate by a widely expected half-a-percentage point, the biggest hike in 22 years, as it seeks to tighten pandemic-era monetary policy.

Market participants are cutting hawkish bets and that’s been a catalyst for gold’s rise, along with the possibility of inflation leaking through as the Fed is not fighting it as hard as expected, trading firm City Index’s senior market analyst Matt Simpson said.

In a news conference after the release of the Fed’s policy statement, Powell explicitly ruled out raising rates by three-quarters of a percentage point at upcoming monetary policy meetings, driving US treasury yields and the dollar sharply lower, and supporting gold. The dollar was holding steady near a one-week low, making the greenback-priced gold more attractive for overseas buyers.

“With the Fed [meeting] behind us ... it does allow gold to shine again in the risk-off environment, which is otherwise known as the Ukraine-Russia confrontation,” Simpson said.

Spot silver climbed 0.9% to $23.17/oz, platinum advanced 1% to $1,001.42, and palladium gained 0.9% to $2,275.92.



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