What’s going on here?
Gold prices surged today as the US dollar eased from its recent highs, driven by expectations of a Federal Reserve rate cut in November.
What does this mean?
On October 11, 2024, spot gold climbed to $2,637.31 per ounce, while US gold futures reached $2,654.30. The demand for this safe-haven asset was fueled by prospects of a rate cut and surprisingly strong US jobs data despite slight inflation upticks. Last month, US consumer prices posted the smallest annual increase in over three and a half years, hinting at possible economic softening. With Fed policymakers signaling potential interest-rate cuts and the CME FedWatch tool showing an 84.4% chance of a November reduction, investors are bracing for gold’s volatility but also eyeing long-term gains, according to a UBS analyst. Yet, even with today’s bump, gold is charting its second straight weekly drop from its record high last month.
Why should I care?
For markets: Gold poised for a bounce.
As the US dollar recedes, gold’s allure brightens, potentially making it a strategic asset in the volatile pre-rate cut period. Meanwhile, in India, demand for gold jewelry is rising as the festival season approaches, prompting dealers to charge premiums for the first time in months. Even though gold has faced weekly declines, the momentum from a likely rate reduction could renew investors’ interest.
The bigger picture: Shifting sands of monetary policy.
Globally, the trajectory of US interest rates influences not just gold but broader market behaviors. A Fed rate cut could stabilize inflation concerns and stimulate economic activity, indirectly affecting precious metal markets worldwide. Other metals are reacting too – palladium saw a notable weekly gain, while silver and platinum face declines, showcasing how interconnected these markets are to central bank policies.
