Biden’s Withdrawal Impacts Markets
President Joe Biden’s decision to abandon his reelection bid has cleared the way for another Democrat to challenge Donald Trump. This political shift has contributed to a weaker dollar, making gold more attractive to buyers holding other currencies.
Trump’s Economic Policies and Inflation Risks
If elected, Trump’s proposed economic policies could potentially fuel inflation. His plans include corporate tax cuts, interest rate reductions, and stricter trade relations, particularly with China. Analysts warn that these measures, especially the implementation of tariffs, could act as inflationary pressures.
Fed’s Monetary Policy Outlook
Markets are pricing in a 97% chance of a rate cut in September, according to the CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding non-yielding bullion, further supporting gold prices.
Key Economic Data Ahead
Investors are closely watching this week’s economic releases, particularly Friday’s U.S. personal consumption expenditures (PCE) figure. This data, along with other indicators such as existing home sales and advance second-quarter GDP, will provide insights into the Federal Reserve’s monetary policy path.
Market Forecast
The outlook for gold remains bullish in the short term. Kyle Rodda, a financial market analyst at Capital.com, suggests that conditions are in place for gold to reach another record high before the end of 2024. The combination of potential rate cuts, political uncertainty, and geopolitical tensions, particularly between the U.S. and China, is likely to benefit gold prices in the coming months.
Traders should closely monitor political developments, economic data releases, and Federal Reserve communications for potential impacts on gold prices and related market movements.
