Gold prices rebounded sharply on Wednesday as the Federal Reserve chief's surprisingly dovish remarks on the central bank's fight to bring down inflation sank the dollar and signaled to investors that a peak in interest rates was likely approaching.
Spot gold climbed 1.2% to $1,951.43 per ounce by 3:48 p.m. ET, its highest since mid-April 2022.
U.S. gold futures settled 0.1% lower at $1,942.80.
Calling Fed Chair Jerome Powell's press conference 'relatively dovish', Standard Chartered analyst Suki Cooper said "signaling the path to peak rates and highlighting falling inflation has given gold prices a boost as the USD weakened and real rates eased."
"We maintain our view for the Fed to pause before cutting rates in H2-23. Gold has found tremendous support from central bank additions and gold investor positioning is elevated for this stage of a hiking cycle, suggesting that many of the macro tailwinds have been priced in and prices are likely to peak in Q1-23."
The Fed raised its target interest rate by a quarter of a percentage point on Wednesday, yet continued to promise "ongoing increases" in borrowing costs as part of its still unresolved battle against inflation.
"Powell's given a bullish market a license to rally," said Tai Wong, a senior trader at Heraeus Precious Metals in New York. "If the intention was to provide a hawkish 25-bps hike this was an inadequate performance."
"He qualified every hawkish statement. Asset markets roared, the USD fell to new, recent lows and gold surged nearly a percent. It's only a matter of time before gold makes new highs and dips will be bought," Wong said.
Greenback-priced gold is highly sensitive to rising U.S. interest rates, which raise the opportunity cost of holding non-yielding bullion, and vice versa.
Spot silver rose 1.3% to $24.01 per ounce, while platinum dipped 0.4% to $1,007.63, and palladium gained 1.7% to $1,676.72.