United States – The US Federal Reserve will hold its Open Market Committee meeting on September 17-18, with expectations of a 25 basis point cut in interest rates, to a range of 5-5.25 percent.
Federal Reserve Chairman Jerome Powell said markets have been waiting for nearly 9 months for the announcement of the meeting of the factors that push the Federal Open Market Committee to approve a cut in US interest rates.
While Powell did not set a timetable or predict how far Fed leaders would go in cutting interest rates, his comments came as close as possible to paving the way for a cut at the next policy meeting.
Interest rates are currently in the range of 5.25-5.5 percent, having remained unchanged since July 2023; the open question now is whether officials will opt for a 25 basis point or 50 basis point cut.
At the Jackson Hole Economic Symposium on August 23, Powell said, “It is time to cut interest rates,” in a shift from the Fed’s monetary tightening policy since early 2022.
The stock market has begun to anticipate the amount of interest rate cuts during the upcoming meetings, as Wall Street analysts see the amount of the cut to be between 3-3.5 percent by the second half of next year.
After years of battling high inflation, Powell, in his Jackson Hole speech, turned notably to the labor market, which he said had “slowed down significantly.”
Thus, the balance of risks has shifted from higher prices to weaker labor markets, strengthening the case for a more than 25 basis point rate cut at the September meeting.
Since the Fed’s last meeting in July, jobs reports have come in below expectations, and the government this week revised some labor market estimates for 2023 and early 2024.
gold trend
Global investment banks, led by Goldman Sachs, expect the prices of both gold and silver to rise throughout 2024 and into the first half of 2025.
In a recent report published last week, JP Morgan expects gold prices to remain near $2,500 per ounce by the end of 2024.
This forecast assumes a Fed rate cut cycle starting in November, rather than September 2024, pushing gold prices to new highs.
In early trading today, gold hit a new all-time high of $2,546 an ounce, surpassing last week’s all-time high of $2,523 an ounce.
While prices are heading for further rise, according to JPMorgan, which sees prices reaching $2,600 an ounce in 2025.
Gold price forecasts are based on economic expectations that core inflation in the US will slow to an average of 2.6 percent by 2025.
The structural drivers that have helped gold rise so far remain a crucial upward driving force going forward, most notably the US interest rate cut.
While the biggest downside risk to gold is a scenario in which the Fed becomes more aggressive in ensuring that inflation quickly reaches its target, which is to keep interest rates unchanged until early 2025.
Central banks
In addition to expectations of imminent interest rate cuts and rising geopolitical tensions, especially in the Middle East, central banks were a major driver of gold prices in 2023 and continue to do so so far.
Led by China, central banks bought 1,037 tonnes of gold in 2023.
Similarly, 2024 started strongly with net purchases of 290 tonnes in the first quarter, making it the fourth-strongest quarter of buying since the buying spree began in 2022, according to the World Gold Council.
This was about 36 percent higher than the quarterly pace (about 213 tons).
But China’s record gold imports are facing downward pressure after the People’s Bank of China – which controls the amount of gold entering China via quotas for commercial banks – halted reported gold reserve purchases in May, ending an 18-month buying spree.
However, central banks and other physical consumers are expected to remain strong buyers, supporting a higher floor for gold prices over the coming period.
Anatolia
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2024-08-26 14:42:11
