2024-03-29 21:57:25
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Gold price at record high – interest rate cut fantasies remain alive
The rally in the price of gold continued in the past week or month. The yellow precious metal rose in price by 9.27 percent in March. In particular, the prospect of falling key interest rates here and there increases the attractiveness of gold. Geopolitical risks such as those in the Middle East or the Ukraine-Russia conflict are also likely to have fueled the rally.
Investors are hoping for a rate cut in June – but Fed member Waller is dampening expectations
Continuing fantasies of interest rate cuts significantly increased the attractiveness of the gold price in March.
Market players are currently still hoping that the US Federal Reserve (Fed) will turn down the infamous interest rate screws next June. The probability of this scenario is currently 51.3 percent, according to the CME Group’s “Fed Watch Tool,” which is widely followed.
However, the interest rate cut fantasies were dampened last Wednesday by Fed representative Christopher Waller. “There is currently no rush to lower the key interest rate,” as the text of the speech said during an appearance at the Economic Club of New York.
The latest data shows that it is prudent to stick with current monetary policy for longer than previously thought, it said.
Last month, the inflation rate increased by 3.2 percent compared to the same month last year and was therefore stronger than in January (3.1 percent). “In response to the latest data, I believe it is appropriate to reduce the total number of rate cuts or postpone them further into the future.”
The risk of a sustained return of inflation should be avoided by premature interest rate cuts, it said.
PCE data with no major surprises
It remains to be seen how investors will react to the “PCE data” published on Friday afternoon next week. Spending on personal consumption increased by 2.5 percent in February compared to the same month last year, as strong as expected. The counterpart for the core rate was also unchanged from the previous month at 2.8 percent.
Said values act as a guideline for the US Federal Reserve with regard to inflation and therefore as a preferred measure of inflation.
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