Daily digest market movers: Gold price capitalizes as Fed rate-cut hopes improve
- Gold price prints a fresh all-time high around $2,160 as market expectations for Federal Reserve rate cuts in the June meeting increase, and global growth prospects remain uncertain. The CME Fedwatch tool shows that the chances for a 25 basis points (bp) rate cut for June’s policy meeting have increased to 60% from 58% on Wednesday.
- The expectations for a rate-cut decision in the June meeting were affirmed despite Fed chair Jerome Powell reiterating that rate cuts are appropriate only if they get convinced that inflation will sustainably return to the 2% target. Powell didn’t offer any specific timing for rate cuts but said, "It will likely be appropriate to begin dialing back policy restraint at some point this year."
- Contrary to market expectations, Minneapolis Federal Reserve Bank President Neel Kashkari delivered a more hawkish stance on Wednesday. Kashkari said that he expects only one rate cut is appropriate due to robust economic data since the start of the year. In December’s economic projections, Kashkari penciled two rate cuts for 2024.
- Meanwhile, uncertainty over global growth has also improved the appeal of Gold. Jerome Powell warned in his prepared remarks that the economic outlook is uncertain. A few economic indicators signal that the United States economy is losing momentum. The Institute of Supply Management (ISM) PMIs reported a decline in growth in February. In the same period, hiring by private employers was lower at 140K against expectations of 150K. In January, jobs posted by US employers were slightly lower at 8.863 million against the 8.9 million in December.
- Across the globe, the outlook of the United Kingdom and the Eurozone economy is uncertain. The former fell into a technical recession in the second half of 2023, while the latter remained stagnant in the same period. On the Asian side, the Chinese economy has vowed to transform its growth model and set an ambitious growth target of 5% for 2024. However, economists have voiced doubts about the chances of reaching this target due to weak retail domestic demand, disinflation, and the real-estate crisis
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