Geopolitical Risks and Gold Prices
Geopolitical tensions, notably in Ukraine and the Middle East, continue to influence the gold market. These ongoing concerns contribute to gold’s status as a safe-haven asset, supporting its price stability.
Gold’s Current Trading Range
Gold has remained within a specific range for most of the month, trading inside $2146.00 to $2222.92. A break above this resistance level could potentially push prices towards the $2,300 mark. Downside risks are huge, however, with the 50-day moving average at $2080.00 a key target. This movement aligns with the market’s reaction to the Fed’s anticipation of three rate cuts in 2024.
Fed’s Rate Cut Strategy
Despite the Fed’s intention to reduce rates, Waller’s recent comments indicate a more cautious approach. He suggests holding the current rate due to inflation concerns, potentially extending this stance longer than expected to achieve a sustainable inflation trajectory.
Waller’s View on Rate Reductions
Waller does not completely dismiss rate cuts but implies they would be contingent on continued progress in lowering inflation. He indicates a strong economy allows the Fed to assess performance before making policy changes, possibly leading to fewer or delayed rate cuts.
Inflation and Rate Cut Expectations
Unexpectedly strong inflation raises doubts about the Fed’s ability to execute its forecasted rate cuts. The Fed, according to Waller, is balancing the risks of easing too soon, which might reignite inflation, against easing too late, potentially harming employment.
Short-Term Market Forecast: Cautiously Bullish
Given Waller’s cautious stance on rate cuts and the ongoing geopolitical risks, the short-term outlook for gold remains cautiously bullish. The possibility of delayed or reduced rate cuts, coupled with gold’s status as a safe haven amid global tensions, suggests a stable to slightly upward trajectory for gold prices in the near term.
