– Rate cut expectations rise
London — Gold prices continue to climb, marking a third consecutive day of gains, driven by recent developments in U.S. economic indicators and shifting expectations regarding monetary policy. The recent moderation of the core inflation in the U.S. has contributed to a positive market sentiment, reigniting hopes for a less restrictive stance from the Federal Reserve in 2025.
Currently, markets are still pricing in one interest rate cut by the Federal Reserve in the middle of the year. However, shifting policy expectations could lead to a decline in U.S. Treasury yields, weighing on the U.S. dollar and providing support for non-yielding assets such as gold.
However, Federal Reserve officials continue to stress that the fight against inflation is ongoing, which may temper expectations for swift policy changes. Additionally, ongoing uncertainty around potential policies from the US administration, particularly with regard to global trade, continues to provide underlying support for gold as a safe-haven asset. At the same time, the evolving geopolitical situation in the Middle East, notably the decreasing tensions, could dampen gold’s safe-haven demand, which has been a significant driver for the metal over the past months.
*Joseph Dahrieh, Managing Principal at Tickmill
