Daily digest market movers: Gold price jumps higher as US yields hit hard
- Gold price falls slightly after refreshing all-time highs at around $2,223 as the US Dollar rebounds from a five-day low of 103.17.
- The demand for Gold is broadly bullish as the Federal Reserve indicated that inflation is moving in the right direction. The Fed is confident that underlying price pressures are easing despite inflation remaining stubborn in the first two months this year. Fed officials project the annual Core PCE Price Index at 2.6% in 2024, higher than the 2.4% anticipated in December’s policy meeting.
- The updated Fed’s dot plot indicated that December’s projections of three rate cuts in 2024 remain on track. Nine out of 19 policymakers support lowering interest rates three times this year, while one had projected more than three. The remaining policymakers anticipated to have two or less rate cuts in the same period.
- This has uplifted expectations for the Fed reducing interest rates from the June policy meeting. The CME FedWatch tool shows that there is a little over 74% chance that a rate cut will be announced in June, which is significantly up from 59% recorded before the Fed’s meeting.
- While the Fed’s projection for lowering interest rates three times this year remains intact, median rate projections for 2025 and 2026 have increased to 2.9% and 3.1%, respectively. The median projections for the longer-term rate have also increased to 2.6%.
- Regarding the United States economic outlook, the Fed sees the Unemployment Rate at 4.0% by 2024, down from 4.1% anticipated in December. Meanwhile, forecasts for the 2024 Gross Domestic Product (GDP) have been upwardly revised to 2.1% from the 1.4% projected in December.
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