Gold Prices Surge On Rate-Cut Optimism – What’s Next?

Markets React as PCE Matches Expectations, Hinting at Fed Rate Cut

A normal day for markets became something extraordinary after the Fed’s preferred measure of inflation – The Personal Consumption Expenditures Price Index, matched economists’ expectations of 2.4%.

The fall from December’s rate of 2.6% boosted optimism that the Fed will cut rates from their current 23-year highs around the middle of this year.

The headline PCE figure, the metric for the Fed’s 2% target, was the lowest for almost three years. That compares with a peak of 7.1% in June 2022 after Russia began its invasion of Ukraine.

According to The GSC Commodity Intelligence – U.S Inflation Tracker Tool – PCE inflation will likely be back at the Fed’s 2% target by June, which ultimately aligns with when the U.S central bank is expected to begin cutting rates.

More importantly, this is the last PCE Inflation report FOMC officials will have access to before they meet on March 19-20. Chair Jerome Powell and his colleagues have already ruled out a rate cut at that meeting – significantly increasing the probability of a rate cut in June by almost 70%.

Gold prices have held above the key $2,000 an ounce level since December, with the precious metal being firmly supported by a multitude of macro factors including Chinese demand, central bank buying as well as growing appetite for safe haven assets amid ongoing geopolitical risk.

In a recent note to clients, analysts at GSC Commodity Intelligence said mounting evidence shows that we are now in a “new era” for Gold.

Last month, Gold priced in multiple currencies including British Pounds, Euros, Australian Dollars, Chinese Yuan and Japanese Yen reached all-time record highs.

The big question now is will Gold priced in US dollars be next to hit fresh all-time highs?

Analysts at GSC Commodity Intelligence believe it’s not a question of ‘if’ but ‘when’. In fact, you just have to take a look at what happened in 2023.

Last year, Gold priced in multiple currencies set new all-time highs by an average of 100 days prior to Gold price denominated in US dollars. If this is a leading barometer for predicting the performance of Gold prices as a whole, then this ultimately means one thing.

Higher Gold prices are coming!

That’s welcoming news for the bulls, but painful for anyone sitting on the sidelines, who must now decide how much FOMO they can handle.