Islam Saeed wrote Thursday, December 14, 2023 01:18 PM It rose gold prices The global market returned strongly to trading above the level of $2,000 per ounce, after the US Federal Reserve meeting, which changed its monetary policy and pushed the dollar to decline significantly to support gold’s rise again.
Spot gold recorded an increase during today’s session, Thursday, by 0.5% to record the highest level at $2040 per ounce, at the time of writing the Gold Billion technical report, after opening today’s session at the level of $2027 per ounce, to trade at the time of writing the report at the level of $2036 per ounce.
This comes after a significant rise in gold prices yesterday, as it recorded an increase of 2.4% to gain $48, after recording the lowest level in 3 weeks during yesterday’s session at $1,973 per ounce.
The main reason behind the rise in gold prices and its return to trading above the $2000 level is the major change in the monetary policy of the Federal Reserve Bank, which during its meeting yesterday fixed interest rates at a range of 5.25% – 5.50% to indicate the end of the cycle of raising interest rates.
The Federal Reserve indicated that inflation rates were declining at a faster pace than its expectations, which prompted it to consider reducing interest rates during the next year by 75 basis points over 3 meetings, which would reduce interest rates to an average of 4.6% after expectations of Fed members last September indicated that… Interest rates will fall to only 5.1% over the next year.
Fed members also expect core inflation to peak at 2.4% next year, lower than its September forecast of 2.6%.
The Fed’s forecasts for the future of interest rates were close to market expectations that placed possibilities for a rate cut over the next year by 100 basis points, which caused significant market movement after the meeting.
On the other hand, market odds now indicate a 75% rate cut in the March 2024 meeting, as this probability rose from 40% before the Fed’s meeting yesterday.
The dollar index fell sharply during today’s session, falling by 0.9%, recording the lowest level in two weeks and recording a decline for the third day in a row, on its way to recording a weekly decline of 1.3%.
As for the yield on US government bonds, it has decreased since the beginning of the week by 6.5% to record the lowest level in nearly 5 months at 3.932%.
The sharp decline in the levels of the US dollar and the yield on US government bonds represent the greatest support for gold to rise in light of the inverse relationship between them, in addition to the decline in the opportunity cost of gold, which does not provide a return to its holders.
The US Federal Reserve’s monetary policy change and the plan to reduce interest rates over the next year will end the Federal Reserve’s support for the dollar, which began in March 2022 when the bank decided to raise interest rates and fight inflation.
Now capital will leave the US bond markets and the US banking sector to head to high-risk investments and to gold as a more stable alternative with great upside potential, especially after it jumped to record a historic level at the beginning of last week at $2,148 per ounce.
The Dow Jones Industrial Average of US stocks jumped yesterday by 1.4% to record the highest level in its history, and the most common S&P 500 index rose by 1.4% to record the highest level since January 2022.
The year 2024 will witness major elections globally, including in the United States, the European Union, India, and Taiwan, and investors’ need to hedge gold more than usual in their portfolios is likely to increase during these periods.
Also, central bank gold purchases are expected to be an important factor in supporting gold during the coming year, as central bank purchases were a major source of demand for gold in 2023, which is expected to be a record year in gold purchases and this will continue in 2024 as well.
The World Gold Council believes that demand by central banks helped gold rise by 10% or more during the year 2023, and even if 2024 does not witness record purchases, the continuation of purchases in itself at a high pace will work to support gold.
2023-12-14 11:18:00
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