Monday Metals Market News (15 July 2024) | Gold Up On September Rate Cut Bets

 

Monday Metals Market News (15 July 2024) | Gold Nears All-Time High On High Hopes For Federal Reserve Rate Cut

Gold (+$12.63) is up again this morning as traders look forward to a very likely interest rate cut from the Federal Reserve in September. Last week, fresh Consumer Price Index (CPI) data from June revealed that inflation continued to slow. During the FOMC’s June meeting, the committee reaffirmed their commitment to lowering interest rates only once economic data demonstrates that inflation is approaching the longstanding 2% target. 

Federal Reserve Chair Jerome Powell emphasized during an interview this morning his belief that the economy has shown signs of recovery in Q3 of 2024. Powell’s bullishness, combined with last week’s favorable inflation data, suggests that a long-awaited interest rate cut is likely coming at the Federal Reserve’s September 17-18 meeting. Interest rate speculation has been a major market-mover for gold prices this year, so traders can expect heavy movement as we approach the next meeting of the FOMC. 

Gold prices jumped quickly this morning before sliding back down to moderate gains during Powell’s speech. The precious metal is still within striking range of $2,450.05, the new all-time high gold price reached in May of this year. It is unclear at this point whether or not climbing odds of a September rate cut have been fully factored into gold price-action. 

Is a Rate Cut Coming in September – And What Would That Mean For Gold Prices?

Speculatory trading based on interest rate cuts has been a fixture of the gold market in 2024. Heightened rate cut bets drove the precious metal to a fresh all-time high in May and have been behind many of gold’s peaks and valleys throughout H2 2024. 

Last year, the Federal Reserve suggested that three interest rate cuts might happen in 2024. As the year continued, stubborn inflation rates made the prospect of multiple rate cuts less likely. Hawkish undertones from Jerome Powell’s public speech last month sent metal prices tumbling. Now, favorable CPI data, a recovering jobs market, and a FOMC willing to consider cutting rates have reinvigorated hopes for multiple rate cuts in the tail-end of 2024. 

In an interview with David Rubenstein of the Economic Club today, Powell stressed that three inflation readings during Q2 2024 “do add” to his belief that inflation is comfortably moving toward the target 2%. These “three better readings” on inflation, Powell said, will play some role in the Fed’s talks as it considers cutting interest rates. Notably, Powell also emphasized that “unexpected” weakness in the United States labor market would also provoke the Fed to ease back on interest rates. 

Federal Reserve Chair Jerome Powell said second-quarter economic data has provided policymakers greater confidence that inflation is heading down to the central bank’s 2% goal, possibly paving the way for near-term interest-rate cuts https://t.co/TnstgcSYyX pic.twitter.com/QMAUqjC6vp

— Bloomberg TV (@BloombergTV) July 15, 2024

CME Group now anticipates a 98.2% chance that the FOMC will move to reduce the target rate (525-550) at their September meeting. In November, the Federal Reserve watchdog predicts a 64.2% chance of another rate cut, which would reduce the target rate to 475-500 or lower. 

Bloomberg reports little market movement following Powell’s remarks, which reiterated talking-points from last week and offered little advice on the timing of future interest rate cuts. The gold market’s reaction was similarly muted, with the metal logging major gains in at market open and slowing during Powell’s commentary. 

Moving forward, expect gold traders to pay careful attention to inflation and employment data, both of which will play a key role in determining when – and how many – rate cuts will happen before the end of this year.