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Gold price holding support above $1,850 after New York Fed president said he sees inflation falling back to 2% by 2024
By: Neils Christensen | May 10, 2022

The gold market continues to hold solid support above $1,850 an ounce and saw little movement following a relatively optimistic outlook from New York Federal Reserve president John Williams.

According to some economists, Williams at the NABE/Bundesbank International Economic Symposium in Germany set the tone for what will be a busy day for U.S. central bank speakers. Tuesday afternoon Federal Reserve Governor Christopher Waller will be speaking at the Economic Club of Minnesota and Federal Reserve Bank of Cleveland President Loretta Mester will participate in a panel discussion at the Financial Markets Conference, in Florida.

Williams said that despite significant economic challenges worldwide, the Federal Reserve has the right tools to bring down inflation and keep the economy on a stable footing.

"Although the task is difficult, it is not insurmountable. We have the tools to return balance to the economy and restore price stability, and we are committed to using them," he said in his opening remarks.

Williams warned that inflation, which saw an annual rise of 8.5% in March, the biggest jump in 40 years, poses a threat to the U.S. economy and that the central bank is committed to bringing consumer prices back down.

"High inflation harms those who are most in need. Too many families are now struggling to meet the increasing cost of necessities. I am resolutely focused on restoring price stability, which is the foundation for a vibrant and healthy economy," he said.

Looking at monetary policy, Williams said that he expects the central bank will move expeditiously in bringing the federal funds rate back to more normal levels this year. The comments come nearly a week after the Federal Reserve raised interest rates by 50 basis points, the biggest increase since 2000.

Williams added that he expects rising interest rates to effectively cool down inflation. He also said that he sees inflation falling close to the Fed's 2% target by 2024 as supply chain issues get resolved. For this year, he said that he sees PCE inflation holding around 4%.

"Although we are facing highly unusual and challenging circumstances, I am confident we have the right tools to achieve our goals. In fact, we have an advantage over previous inflationary episodes: Our monetary policy tools are especially powerful in the very sectors where we see the greatest imbalances and signs of overheating—such as durable goods and housing," he said.

The gold market has taken Williams' comments in stride as it holds in neutral territory. June gold futures last traded at $1,858.80 an ounce.

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