Metals Move Sideways Ahead of Federal Reserve Meeting – Here’s What To Expect This Week.

 

Metals Move Sideways Ahead of Fed Meeting

(Bullion News Network) – Precious metals moved little today to open the week. The spot price of gold gained $5.60 per ounce, adding just over .2% ahead of December’s Federal Reserve meeting. Silver moved similarly, notching a gain of four cents and hovering above the $30.60/oz line. The Federal Open Market Committee (FOMC) will meet on Wednesday to set the federal funds rate, and analysts expect precious metal prices to move more ahead of – and after – that meeting. The gold-silver ratio gained marginally on the day, settling at the 86.60-.80:1 line by market close on Monday. 

The FOMC is slated for a tone-setting meeting on Wednesday as markets grapple with a slate of mixed economic signals. Consumer prices ticked up but remained on par with expectations in November. Wholesale prices surged in the same month, doubling expectations and increasing by .4%. Employment data from November exceeded expectations, with the U.S. creating 227,000 nonfarm jobs after a worrying October performance. While the employment data suggested a bounce back after an October besieged by strikes and natural disasters, troubling wholesale prices from the November PPI suggest that inflation is likely stickier than the Fed had hoped. 

A “hawkish cut” is what the market expects on Wednesday, December 18, 2024.

This meeting: 25 basis point cut a near certainty.

January meeting: 78% probability of a pause. #FOMC #Powell #InterestRates #Fed #FederalReserve pic.twitter.com/hpvyoPMbyZ

— Chris Ciovacco (@CiovaccoCapital) December 14, 2024

Last month, Fed Chair Jerome Powell told a group of Dallas business owners that the Fed does not need to be “in a hurry” to cut interest rates. The implied market probability that interest rates will come down by 25 basis points at Wednesday’s meeting has increased from 61.9% to 95.4%, per CME FedWatch. The tool anticipates a high likelihood (79.9%) that rates will remain at the new target rate of 425-450 at the Fed’s January meeting, mirroring concerns by some analysts that the Fed’s findings will strike a more hawkish tone heading into 2025. 

Some experts say that the Fed is likely to deliver a “hawkish rate cut,” which means that the FOMC will opt to cut rates while tempering public expectations for more rate cuts in the near future. A hawkish rate cut would almost certainly complicate the market’s reaction, especially given how significant a role speculation has played in rate cut price movements in the precious metals futures market throughout 2024. The 25 bps rate cut expected on Wednesday would bring the target federal funds rate down an entire percentage point from its peak in September, following which the Fed shocked American markets with a “jumbo” 50 bps rate cut. 

The Fed will announce its rate cut decision at 2 PM ET on Wednesday. Federal Reserve Chair Jerome Powell will deliver a speech and field questions at a press conference 30 minutes later at 2:30 PM ET. Investors should expect both stock and precious metal prices to fluctuate throughout the day on Wednesday as markets react to what is shaping up to be a bellwether FOMC meeting.