Gold Prices Hit an All-Time High on Wednesday as the Federal Reserve Projected Slower Economic Growth and Higher Inflation

Gold prices hit an all-time high Wednesday as the Federal Reserve projected slower economic growth and higher inflation, boosting demand for the safe haven.

Gold prices soared to fresh highs on Wednesday as the Federal Reserve projected slower economic growth and higher inflation, boosting demand for the safe-haven asset.

What Happened: Spot gold hit $3,056 per ounce earlier in the day before retracing slightly. The yellow metal is up over 16.21% year-to-date.

The central bank kept the interest rates unchanged, and lowered 2025 GDP growth projections from 2.1% to 1.7%, fueling further gains for gold.

The rise has trickled down to physical gold-backed cryptocurrencies as well. Tether Gold and PAX Gold have gained 16.67% and 16.42% year-to-date.

These increases contrasted sharply with the performance of the rest of the cryptocurrency market.

The overall market capitalization has shrunk 14% from $3.6 trillion to $2.8 trillion since the year began, with market barometer Bitcoin BTC/USD slipping over 8%. Notably, Bitcoin has been aggressively promoted as a “digital gold” asset by its supporters.

At the time of writing, Spot Gold was exchanging hands at 3,046.14, down 0.10% in the last 24 hours, according to data from Benzinga Pro.

See Also: Cathie Wood Believes Most Memecoins Will Face ‘Fearsome Declines,’ But They Could End Up Becoming Collector’s Items

The upbeat economic outlook and potential for increased consumer prices supported the dollar in early trading on Wednesday, setting the stage for a final interest rate hike by the Federal Reserve later in the year.

The greenback advanced 0.1% to 101.86 after scaling a seven-month high of 102.04 in the previous session. It had also gained 0.4% overnight as traders reacted to minutes of the Fed’s July meeting, which showed that a "substantial majority" of policymakers still saw a need for further rate increases this year.

The minutes, released on Tuesday, suggested that despite the recent softening in inflation, Fed officials were largely in agreement that it would be prudent to keep monetary policy sufficiently tight for an extended period.

The upbeat economic outlook and potential for increased consumer prices supported the dollar in early trading on Wednesday, setting the stage for a final interest rate hike by the Federal Reserve later in the year.

The greenback advanced 0.1% to 101.86 after scaling a seven-month high of 102.04 in the previous session. It had also gained 0.4% overnight as traders reacted to minutes of the Fed’s July meeting, which showed that a "substantial majority" of policymakers still saw a need for further rate increases this year.

The minutes, released on Tuesday, suggested that despite the recent softening in inflation, Fed officials were largely in agreement that it would be best to keep monetary policy sufficiently tight for an extended period.

However, the possibility of a final interest rate hike by the Fed later this year was largely priced into the markets, potentially limiting any significant dollar gains.

Instead, the focus remained on the U.S. dollar index, which measures the greenback against a basket of major currencies. The index is now approaching the highest level seen since March 2023.

The stellar performance of the dollar this year can be attributed to several key factors. The divergence in monetary policy between the U.S. and other major economies, such as the euro zone and Japan, has been a primary driver.

As the Federal Reserve gradually raised interest rates to combat inflation, the Bank of Japan and the European Central Bank opted for a more dovish approach, keeping rates lower for an extended period. This divergence in monetary policy naturally led to increased demand for the dollar and reduced demand for other валюты.

Moreover, the recent economic data from the U.S. has been surprisingly resilient, further supporting the dollar. Notably, despite the rapid pace of interest rate hikes, the labor market remains remarkably strong, and consumer spending, which accounts for the majority of economic activity, continues to be healthy.

This optimistic economic outlook and potential for increased consumer prices supported the dollar in early trading on Wednesday.

The world’s no. 1 cryptocurrency, Bitcoin, was trading at $27,208 at press time, the last 24 hours.

Despite the recent downturn, Bitcoin has experienced a stellar year so far, demonstrating promise as a potential investment vehicle. Earlier this year, in March, Bitcoin reached a 14-month high of $29,275, nearly touching the $30,000 mark.

However, the cryptocurrency's rally was short-lived as it encountered resistance at the 2022 highs, leading to a decline of about 10% from the March peaks.

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