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Gold trading reminder: The price is going crazy! Two major positive news encouraged bulls, and gold prices hit a new record high
2024-03-29
330
The spot gold market will be closed on Friday (March 29) due to the Good Friday holiday. Gold prices hit another record high on Thursday and had their best monthly performance in more than three years, helped by expectations of U.S. interest rate cuts and strong safe-haven demand.
Spot gold rose 1.74% to $2,232.78 an ounce on Thursday, hitting a record high of $2,236.05 during the session. Gold prices rose 9% in March, their best monthly performance since July 2020 and their second consecutive quarter of gains. U.S. gold futures closed 1.2% higher at $2,238.4 an ounce.
Interest rate cut expectations + safe-haven buying help gold prices surge higher
Daniel Ghali, commodities strategist at TD Securities, said traders were "adjusting positions ahead of the holidays and (increasing) trading activity as we approach the end of the month and quarter," which boosted gold prices.
Ghali added that if markets start to anticipate deeper cuts in the Fed's rate cut cycle, gold could rise further and potentially "hold these highs, but we do see signs of buying drying up in the near term."
Everett Millman, chief market analyst at Gainesville Coins, said another reason for the rise in gold prices is that "global geopolitical tensions remain tense," which may prompt investors to buy gold as a neutral reserve asset.
Pay attention to US PCE data
The core U.S. personal consumption expenditures (PCE) price index will be released on Friday, which may help investors gauge the Fed's policy stance. The market currently expects the core PCE to be announced on Friday to slow to 0.3% from 0.4% month-on-month. The year-on-year growth rate is still higher than the Fed's 2% target and is expected to remain unchanged at 2.8%.
Traders now see a 64% chance of a rate cut in June, according to CME Group's FedWatch tool.
The U.S. economy grew by 3.4% in the fourth quarter, exceeding expectations and continuing to lead among developed countries.
Overnight data showed that the U.S. economy grew 3.4% faster than expected in the fourth quarter, continuing to lead among developed countries, and the U.S. dollar index remained very strong. The U.S. dollar index rose 0.25% on Thursday to close at 104.55. It hit a new high of nearly one and a half months to 104.73 during the session.
The U.S. economy grew faster than previously expected in the fourth quarter, helped by strong consumer spending and business investment in nonresidential buildings such as factories and medical facilities.
A report released by the U.S. Commerce Department on Thursday also showed solid growth in corporate profits in the last quarter, driven by non-financial companies. Rising profits, combined with higher worker productivity, could encourage companies to retain employees and extend the economic expansion.
The economy has shaken off recession fears and, although growth has slowed, it is still growing faster than other developed countries around the world. Since March 2022, the Federal Reserve has raised interest rates by a total of 525 basis points to curb inflation.
The report also showed that core inflation pressures eased in the last quarter, but did not change expectations that the Federal Reserve will begin cutting interest rates in June.
"The economy is in good shape," said Bill Adams, chief economist at Comerica Bank. “Compared with the period during and affected by the epidemic, the economy is running more smoothly.”
The U.S. Department of Commerce's Bureau of Economic Analysis said in its final estimate of fourth-quarter gross domestic product (GDP) that GDP grew at an annualized rate of 3.4% in the last quarter, up from the previously reported 3.2%. The revision reflected higher revisions to consumer spending, business investment and state and local government spending, offsetting lower revisions to inventory accumulation and exports. Economists polled by Reuters had expected no revision to the annual GDP growth rate.
Economic growth exceeded 1.8%, and Fed officials believe that this growth rate will not stimulate an acceleration of inflation. The annual growth rate in the third quarter was 4.9%, and the economy will grow by 2.5% in 2023, an acceleration from 1.9% in 2022. The first quarter quarter-on-quarter annual growth rate is expected to be approximately 2.0%. Core inflation fell to 2.0% last quarter from 2.1%.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a rate of 3.3%, contributing 2.2 percentage points to GDP growth. The previous estimate for growth was 3.0%. The growth rate of the service industry was revised upward.
Another report from the Labor Department showed that the number of initial state unemployment claims fell by 2,000 in the week ended March 23 to a seasonally adjusted 210,000. Economists had expected 212,000. Despite a series of high-profile layoffs earlier this year, jobless claims have hovered between 200,000 and 213,000 since February. The report shows that in the week ending March 16, the number of people continuing to apply for unemployment benefits increased by 24,000 to 1.819 million. The week falls within the survey period for the government's March non-farm payrolls report.
The University of Michigan consumer confidence index rose to its highest level since July 2021, climbing to 79.4, beating expectations of 76.5. After plunging -4.7% in January, pending home sales recovered in February, rising 1.6% month-on-month, above market expectations of 1.5%.
Follow the Fed Chairman’s speech
Also watch on Friday for a speech by Federal Reserve Chairman Jerome Powell at an event at the San Francisco Fed Bank, titled "Macroeconomics and Monetary Policy."
Speaking at the Economic Club of New York on Wednesday, Federal Reserve Governor Christopher Waller said the Fed was not in a rush to cut interest rates. Still, he held out hope for a rate cut, saying "expected further progress in lowering inflation would make it appropriate for the Fed to begin lowering the target range for the federal funds rate this year."
The Fed is expected to remain cautious about cutting interest rates, as starting to cut rates too early or cutting rates too much could once again exacerbate price pressures. At the same time, delaying rate cuts could put unnecessary pressure on the labor market and economy.
Economists at Commerzbank said, "Even the Fed's hawkish comments don't seem to be affecting precious metals. Just on Wednesday, Fed Governor Christopher Waller emphasized that recent economic data pointed to the need to delay or reduce the extent of interest rate cuts. Therefore, the market seems to have The risk of a later and smaller rate cut in the U.S. is underestimated. While the median rate forecast among top Fed officials was unchanged at the last meeting, the distribution shows that only a few would need to raise their rate forecasts to push the midpoint."
Economists at ANZ Bank said, "The rise in gold prices indicates that the market expects that further decline in inflation should support the central bank's interest rate cuts later this year, and safe-haven demand also remains strong." "While we continue to hold a positive long-term view, A pullback is likely in the short term. Price pullbacks are opportunities to enter long positions. We expect gold prices to be close to $2,300 per ounce by the end of 2024."
Because the gold market is closed on Friday, there may be a gap when the market opens next Monday, and investors need to be vigilant.
The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.
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