XAUUSD - Is in a holding pattern as price action remains nuanced
Updated
Investors speculating in gold face a nuanced market. Gold prices remain neutral around $1,970/ounce, rebounding from a three-month support level at $1,939/ounce. The Federal Reserve's decision to keep interest rates unchanged caused a sell-off in gold, but it may still raise rates twice this year.
Currently, gold is behaving more like a pro-cyclical asset than a safe haven. The macroeconomic outlook is complex, so it's not as simple as lower real yields or a weaker dollar leading to higher gold prices.
Current conditions are favorable, but there is a warning to be cautious about prices. It might be wise to consider a small investment in gold. However, due to the complexity of the situation, there is no clear indication to make significant buying or selling decisions at this time.
Currently, gold is behaving more like a pro-cyclical asset than a safe haven. The macroeconomic outlook is complex, so it's not as simple as lower real yields or a weaker dollar leading to higher gold prices.
Current conditions are favorable, but there is a warning to be cautious about prices. It might be wise to consider a small investment in gold. However, due to the complexity of the situation, there is no clear indication to make significant buying or selling decisions at this time.
Note
The fast-and-furious tightening campaign appears to be paying off. Headline CPI stood above 8% for much of last year, but now it’s running at 4.0% year-over-year.
Although the directional improvement is welcome, it should not be confused with mission accomplished; after all the current rate is still double the target while the core gauge shows extreme stickiness.
Note
.The Fed officials' estimates on future borrowing costs are shown in a scatterplot, which is more hawkish than the version presented in March. The average interest rate forecast for 2023 has increased from 5.1% to 5.6%. The highest rate projected is 5.50%-5.75%, implying two 25 basis point hikes in the second half of the year.
For 2024, policymakers predict the federal funds rate will decrease to 4.6%. Three months ago, the central bank saw rates at 4.3%. Looking ahead to 2025, the projected benchmark rate is expected to decrease to 3.4%, lower than the March forecast of 3.1%. All of this suggests there is little desire for aggressive interest rate cuts in the coming years, given the persistent inflation.
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