Breaking News: Gold Hits Two-Week High… But Beware if it Reaches This Price!
Gold prices reached a two-week high during trading today, Thursday, as U.S. Federal Reserve Chairman Jerome Powell opened the door to early interest rate cuts in September.
Peter Fung, head of trading at Wing Fung Precious Metals, stated, “The upward trend in gold remains intact, and prices are expected to reach $2,500 this year with the Federal Reserve’s interest rate cuts.”
On Wednesday, Federal Reserve Chairman Jerome Powell said that interest rates could be cut as soon as September if the U.S. economy follows its expected path, bringing the central bank closer to the end of its more than two-year battle against inflation.
Non-yielding gold prices tend to flourish in a low-interest-rate environment.
Matt Simpson, senior analyst at City Index, cautioned gold investors when prices exceed $2,500, noting that gold has struggled to maintain gains around these levels.
Market focus now shifts to the U.S. jobs report on Friday.
Simpson added, “If job data is hotter than expected, it could impact gold as we approach the weekend.”
Gold at Yesterday’s Settlement
Gold futures prices rose during Wednesday’s trading, reaching a record high for the second time this month amid expectations of U.S. interest rate cuts.
At settlement, gold futures for December delivery—the most active contract—rose 0.85% or $21.1 to $2,473 per ounce, a record for the most active contract, with the yellow metal posting a monthly gain of 3.65%.
Gold futures trading settled before the U.S. Federal Reserve’s monetary policy decision, which resulted in maintaining the interest rate, and before the press conference held by Federal Reserve Chairman Jerome Powell.
Gold and the Dollar Now
Spot gold was little changed at $2,444.88 per ounce, after hitting its highest level since July 18 earlier in the session. Prices were only $39 below the all-time high of $2,483.60 set on July 17.
Meanwhile, U.S. gold futures rose 0.75% to $2,492.
On the other hand, the U.S. dollar index increased by 0.04% to 103.900 points.
Other Metals
Silver in spot transactions fell 0.4% to $28.92 per ounce, platinum lost 0.4% to $973.85 per ounce, and palladium declined 0.1% to $923.95 per ounce.
Breaking News: U.S. Federal Reserve Issues Interest Rate Decision and Key Signals
The U.S. Federal Reserve kept the interest rate unchanged at 5.5%, as expected by all investors and financial institutions.
Federal Reserve officials decided on Wednesday to keep short-term interest rates steady but indicated that inflation is nearing the target, which could pave the way for future rate cuts.
Central bankers gave no clear signals that a rate cut is imminent, choosing to maintain language indicating ongoing concerns about economic conditions while acknowledging progress made. They emphasized the need for further progress before it would be possible to lower interest rates.
The Federal Open Market Committee stated, “The committee sees the risks associated with achieving its employment and inflation goals as more balanced,” a slight improvement compared to previous statements.
The statement continued, “Inflation has decreased over the past year but remains somewhat elevated. In recent months, some progress has been made toward achieving the committee’s goal of 2% inflation.”
This language also represented an improvement compared to the June meeting, when the policy statement indicated “modest progress” only in reducing price pressures that had reached their highest levels since the early 1980s two years ago. The previous statement described inflation as “elevated,” whereas it is now described as “somewhat elevated.”
Other adjustments were made, with the committee unanimously voting to keep the target overnight borrowing rate between 5.25% and 5.5%. This rate, the highest in 23 years, has remained in place over the past year due to 11 hikes aimed at reducing inflation.
Members of the committee were noted to be “attentive” to risks on both sides of their mandate to achieve full employment and low inflation, with the word “closely” removed from the June statement.
Markets were watching for signs that the Federal Reserve would cut rates at its next meeting in September, with expectations for further cuts in November and December meetings, assuming one percentage point moves.
However, the statement retained a key phrase about the Federal Reserve’s intentions: “The committee does not expect it will be appropriate to cut the target range until it has greater confidence that inflation is moving sustainably toward 2%.”
This phrase emphasized the Federal Reserve’s data dependency. Officials insist they are not on a pre-set path for interest rates and will not be guided by forecasts.
Recent economic data indicate that price pressures have significantly decreased from their peak in mid-2022, when inflation reached its highest level since the early 1980s.
The Federal Reserve’s preferred measure indicates inflation at around 2.5% annually, although other indicators show slightly higher readings. The Federal Reserve targets 2% inflation and insists it will remain committed to this goal despite pressure from some quarters to tolerate higher levels.
Despite maintaining the most stringent monetary policy in decades, the economy continued to grow.
The gross domestic product recorded an annual growth rate of 2.8% in the second quarter, surpassing expectations thanks to increased consumer and government spending and inventory replenishment.
Labor market data were less robust, although an unemployment rate of 4.1% is still far from what economists consider full employment. The Federal Reserve’s statement noted that unemployment “has risen but remains low.” A report from payroll processing company ADP on Wednesday showed that private sector job growth for July was only 122,000, suggesting the labor market may be weakening.
However, there was some positive data on inflation in the ADP report, with wages increasing at their slowest pace in three years. The Labor Department also reported on Wednesday that wages, benefits, and salaries rose by only 0.9% in the second quarter, below expectations and the 1.2% increase in the first quarter.
Federal Reserve officials pledged to proceed cautiously, despite signs of declining inflation and concerns that the economy might not be able to withstand the highest borrowing costs in 23 years for much longer. Their position received additional support on Wednesday when another economic report showed that pending home sales rose by a remarkable 4.8% in June, surpassing expectations for a 1% increase
