Gold Near Record Highs Ahead of Fed Rate Decision and Strong Dollar Influence

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Gold Near Record Highs Ahead of Fed Rate Decision and Strong Dollar Influence

Team FS

18/Sep/2024

Gold price remains around $2,570 per ounce, approaching record highs amid a weaker dollar and expectations of a Federal Reserve rate cut.

Fed fund futures show a 65% probability of a 50-basis-point cut by the Fed, with markets also considering a smaller 25-basis-point cut.

US retail sales data revealed a 0.1% increase in August, defying forecasts and contributing to a slight easing in gold prices.

Gold prices held steady around $2,570 per ounce on Wednesday, hovering close to record highs as market attention focused on the outcome of the Federal Reserve's two-day policy meeting. A weaker dollar and expectations of an upcoming interest rate cut have supported the gold price, keeping it near its historical peak.

Federal Reserve Rate Cut Expectations

The Federal Open Market Committee (FOMC) is set to conclude its meeting later today, with investors anticipating the Fed’s first rate cut since 2020. Fed fund futures indicate a growing consensus for a 50-basis-point reduction, with current probabilities at 65%, while a smaller 25-basis-point cut is also considered, standing at 35%. This significant shift in expectations reflects the market's anticipation of a more aggressive stance on monetary policy easing.

Impact of US Retail Sales Data

Gold prices experienced a slight dip on Tuesday as US retail sales data for August showed an unexpected 0.1% rise, contrary to forecasts that had predicted a 0.2% decline. This follows a revised 1.1% increase in July, suggesting relatively strong consumer spending and contributing to the minor easing in gold prices.

Upcoming Central Bank Decisions

Looking ahead, the Bank of England (BoE) is expected to maintain the UK interest rates on Thursday. Meanwhile, the Bank of Japan (BoJ) is likely to keep its rates unchanged on Friday but may signal a readiness to hike rates if economic forecasts are met. These decisions could further influence global financial markets and commodity prices.

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Gold Near Record Highs Ahead of Fed Rate Decision and Strong Dollar Influence

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