Gold (GLD) is edging closer to a record high, fueled by increasing speculation that the Federal Reserve might begin cutting interest rates as early as next year. This anticipation has intensified following recent comments from Federal Reserve officials, suggesting a potential shift in monetary policy. The market sentiment is tilting towards a possible economic downturn and a consequent easing of Fed policies, with the US Treasury market witnessing the most bullish stance on record since JPMorgan (JPM). started its weekly survey in 1991.
The decline in bond yields, a reaction to the Federal Reserve Bank of Cleveland President Loretta Mester's indication of maintaining steady rates in December, has further bolstered gold's position. Despite a growing belief in inflation's downward trajectory, as noted by Atlanta Fed President Raphael Bostic, Richmond Fed's Thomas Barkin emphasized the need to keep rate hike options open. Gold's surge, over 11% since October, initially spurred by safe-haven buying during the Israel-Hamas war, is now bolstered by diminishing global bond yields, drawing near the pandemic-era record high.
Economic indicators such as the faster-than-expected GDP growth in the third quarter, coupled with weaker consumer spending, are influencing gold's trajectory. Investors are now keenly awaiting the Federal Reserve’s preferred underlying inflation measure, which will provide further insight into potential interest rate movements. As of now, spot gold has climbed 0.3% to $2,047.37 in New York, approaching its historical peak and reflecting the market's anticipatory stance on the Federal Reserve’s next moves.
