Gold Prices Soar Above $2,450 Amid Fed Easing Expectations and Political Uncertainty
17 July 2024
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Key Points:
- Gold prices exceed $2,450 amid Fed easing expectations.
- Fed Chair Powell signals potential rate cuts tied to inflation targets.
- Gold is seen as a hedge against economic uncertainty.
Gold prices surged past $2,450 on Tuesday, driven by increasing expectations that the U.S. Federal Reserve will begin an easing cycle in September. This rally cleared the May 20 high as Fed Chair Jerome Powell addressed the Economic Club of Washington, highlighting the economy’s solid performance and signaling potential rate cuts once inflation trends towards the 2% target. The anticipation of these rate cuts has fueled investor interest in gold, traditionally seen as a hedge against economic uncertainty and inflation.
Fed Rate Cut Expectations and Market Reactions
The CME FedWatch Tool shows a high probability of a 25-basis point rate cut in September, with many forecasting a total of 50 basis points in cuts through 2024. However, the accuracy of these optimistic predictions remains uncertain as the next FOMC meeting approaches in 14 days. Market analysts are divided on the timing and extent of the Fed’s potential easing, making the upcoming meeting crucial for future market direction. This uncertainty is likely contributing to the increased volatility and trading volumes in gold.
Political Factors and Technical Indicators
Adding to the upward momentum in gold prices is the potential re-election of former President Donald Trump in November. Trump’s proposed policies, including tariff hikes and tax cuts, are expected to increase the U.S. budget deficit and spur inflationary pressures. The bullish momentum in gold appears strong, supported by the Relative Strength Index (RSI) on the daily chart, which is trending higher and nearing typical overbought conditions. Investors are closely watching these developments, as both economic policies and technical indicators suggest further potential gains for gold.
