The yellow metal (gold) continues to stand firm above the $2000 per ounce level. The sharp recovery of the dollar from its lowest levels in the past four months this week has also impacted gold prices. Officials at the Federal Reserve are attempting to ease bets on interest rate cuts.
A significant number of Federal Reserve officials stated on Monday that the market’s enthusiasm for immediate interest rate cuts is somewhat unfounded. They emphasized that steady inflation might keep monetary conditions stricter for a longer period. The President of the Federal Reserve Bank in Chicago, Austan Goolsbee, expressed confusion about how the markets reacted to the Federal Reserve’s meeting last week. Meanwhile, the President of the Federal Reserve Bank in Cleveland, Loretta Mester, stated that the Federal Reserve is not looking at interest rate cuts but rather at the duration the policy needs to remain tight to bring inflation back to its 2% target.
Their comments somewhat contradicted the cautious expectations set by the Federal Reserve during its recent policy meeting for this year, where the central bank stated it had finished raising interest rates and would consider cuts in 2024. Comments from the Federal Reserve led markets to price in interest rate cuts by March 2024. These bets also led to inflows into interest-sensitive assets like gold. The yellow metal rose above $2000 per ounce after the Federal Reserve meeting and has maintained this level since then.
Gold is expected to benefit from a low-interest rate environment, as an increase in interest rates raises the opportunity cost of investing in the yellow metal. Copper is also moving higher amid hopes of Chinese stimulus. Copper prices rose on Tuesday, supported by expectations of further monetary stimulus in China after the People’s Bank of China injected substantial liquidity into the economy last week. Copper witnessed strong gains in recent sessions, tracking the weakness of the dollar and the injection of over $100 billion in yuan liquidity by the People’s Bank of China to support growth.
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Shady Fouad is a technical analyst at LDN Company
Shady's strategic vision in the currency markets is reinforced by more than fifteen years of trading experience, which enables him to blend economic and technical analyzes with high efficiency, and find the best investment ideas for traders.
