Gold Rally Continues on Inflation Readings, December Rate Cut Bets

 

Gold Rally Continues As Traders Bet Big On December Rate Cut Odds

(Bullion News Network) – Gold’s price run continued this morning after the Consumer Price Index (CPI) met market forecasts, bolstering expectations that a rate cut is likely when the Federal Reserve meets next Wednesday. The CPI jumped .3% but met expectations, making a strong case that rates could come down again at the FOMC’s final meeting of 2024. CME Group’s FedWatch now projects a 98.5% implied probability that the Fed will opt to cut interest rates, up from 65.3% just one month ago. Interest rate speculation has driven much of gold’s historic run this year, and today’s price action suggests widespread market confidence that interest rates will drop one more time before the end of the year. 

Last month, the gold market moved in volatility after Federal Reserve Chair Jerome Powell suggested that the Fed had no reason to be “in a hurry” to cut interest rates. A strong jobs report earlier this month pairs well with today’s inflation reading, with both data points making a compelling case for the Fed to pull the lever on the third rate cut of 2024. Both the stock market and precious metals market surged on November’s inflation numbers, with the Nasdaq closing above 20,000 for the first time in its history. Gold made more headway above the $2,700 line, crossing $2,720/oz and landing within $70 of the all-time high set on October 30th. 

Geopolitics are also motivating the latest gold price run. Turmoil in the Middle East has been a primary market mover of precious metals throughout the year; gold and silver are safe haven assets that tend to see increased demand during periods of geopolitical tension and conflict. 

The collapse of the Assad regime in Syria over the weekend gave precious metals a strong boost on Monday, a trend which continued this morning. Bashar al-Assad was ousted on Sunday by rebels, fleeing to Moscow shortly before the fall of Damascus. The fall of the Assad government was lauded by leaders around the world, but officials and experts say that the change in leadership is likely to create a risky power vacuum that could threaten the stability of the entire region. Gold jumped on the news, gaining nearly $30 as traders turned toward safe haven assets like gold and silver to hedge against the uncertain developments in Syria and neighboring countries. 

Assad’s flight from Damascus also has major implications for both Israel in the United States. For now, three major players seem to be vying for control of Syria in the aftermath of Assad’s surrender. Turkish-backed forces are in control of Manbij in the North, while the US-backed Kurdish forces control territory East of Deir el-Zour. The Jihadi rebels responsible for ousting Assad have the largest holdings in the country, although Israeli forces have now crossed into the Syria-Israel buffer zone in the Southwest. 

Establishing a new political order in Syria will be a tricky task, experts say. Although the collapse of Assad appears to be a promising sign toward the end of a decades-long civil war in the country, uncertainty still dominates the region as several factions jockey for control in the power vacuum Assad left behind. 

Gold ended Wednesday up more than $25 and is currently up $90 since last Friday. Next week will be a major test for the gold market as investors await what is likely to be the third and final interest rate cut of 2024. In the meantime, the world’s attention is fixated on an uncertain future being rebuilt atop the rubble of Syria’s capital.