Gold price jumps as Fed’s Powell talks chance of recession and restrictive rates

NEW YORK (Sept 21) Gold erased its initial Fed-induced losses, jumping more than 1% on the day. Prices reacted to Federal Reserve Chair Jerome Powell’s comments on recession and peak rates following a third consecutive 75-basis-point hike Wednesday.  

December Comex gold futures neared $1,700 an ounce as prices jumped more than $20 on the day, last trading at $1,692 an ounce.

Commenting on aggressive rate hikes, Powell said a period of below-trend growth is very likely. “This is something we need to have,” along with softer labor market conditions, he said.

“No one knows if this process will lead to a recession or how significant that recession will be. That is going to depend on how quickly price pressures come down ... and whether we get more labor supply,” Powell added. "The chances of a soft landing are likely to diminish to the extent that policy has to be more restrictive."

But he also pointed out that failure to restore price stability would translate into even "greater pain later on."

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