- In the past week, the gold market failed to maintain its initial support at $2,400.
- However, it successfully upheld a critical bullish trendline above $2,350, potentially igniting a new upward momentum.
- According to analysts, the Federal Reserve’s anticipated interest rate cut by the end of the quarter is a significant factor to watch.
Gold’s resilience amidst market volatility reflects a robust bullish trend driven by Federal Reserve policy expectations.
Gold’s Bullish Trend Amid Federal Reserve Rate Expectations
Despite short-term market fluctuations, analysts maintain that gold’s upward trend remains intact. This outlook is bolstered by the growing anticipation that the Federal Reserve will cut interest rates by September. The CME FedWatch Tool indicates that the market has fully priced in a rate reduction by September. Senior Market Analyst at OANDA, Kelvin Wong, views the recent price corrections in gold as part of a larger bullish trend. He highlights that the current monetary environment, favoring rate cuts over hikes, supports a continued rally in gold prices.
Impact of Federal Reserve’s Easing Policy on Gold
George Milling-Stanley, Chief Gold Strategist at State Street Global Advisors, comments that the direction of interest rates is clear, and gold is expected to maintain its upward momentum. He observes that the Federal Reserve is on track to initiate a rate-cut cycle starting in September, which will likely weaken the U.S. dollar and act as a tailwind for gold prices.
Market’s Pricing in of Rate Cut Despite Persistent Inflation
Despite inflation remaining above the central bank’s 2% target, markets are aggressively pricing in a rate cut by the end of summer, generating a favorable sentiment for gold. The U.S. Commerce Department reported that the core Personal Consumption Expenditures (PCE) price index, a critical inflation measure, remained unchanged at 2.6% over the past year. Economists believe that this data does not hinder the possibility of a rate cut in September. Analysts from TD Securities suggest that the forward guidance from the Federal Reserve’s upcoming meetings will be pivotal in setting the stage for an easing cycle. Although Federal Reserve Chair Jerome Powell may not commit to a rate cut, he is expected to indicate that the central bank is moving in that direction.
Upcoming Economic Data to Watch
Next week’s Federal Reserve monetary policy meeting is the primary economic event, with the Department of Labor’s non-farm payroll data on Friday sharing the spotlight. Economists anticipate that the combination of cooling inflation and a slowing labor market will push the Federal Reserve towards a rate cut before the year’s end. The Federal Reserve is not the only central bank preparing for policy announcements. The Bank of England will announce its rate decision on Thursday, with expectations of a cut. Similarly, the Bank of Japan will hold its monetary policy meeting on Tuesday.
Conclusion
In summary, gold’s bullish trend persists amid rising expectations of Federal Reserve rate cuts by September. The upcoming economic data and central bank meetings will play a crucial role in shaping market sentiment. Investors should remain vigilant, as any shifts in policy direction or economic indicators could impact the trajectory of gold prices. Future outlook appears positive, with gold poised to benefit from a weakening U.S. dollar and favorable monetary policies globally.
