Gold Price Talking Points
The price of gold[1] may continue to exhibit a bullish behavior as it clears the August 2013-high ($1434), but fresh comments coming out of the Federal Reserve appear to be rattling the near-term rally as central bank officials tame bets for a rate cutting cycle.
Gold Price Rally Stalls as Fed Officials Endorse ‘Insurance Cut’
The surge in the price of gold following the Federal Reserve meeting indicates a material change in market behavior as the adjustments to the Summary of Economic Projections (SEP)[2] fuel bets for lower US interest rates.
Even though US President Donald Trump is scheduled to meet with China President Xi Jinping at the Group of 20 (G20) summit[3] scheduled for later this week, it may only be a matter of time before the Federal Open Market Committee (FOMC) reverses the four rate hikes from 2018 as the “apparent progress on trade turned to greater uncertainty.”
In turn, Fed Fund futures continue to reflect a 100% probability for a 25bp reduction at the next interest rate decision on July 31, and gold prices may continue to benefit from the current environment if a growing number of Fed officialsproject a lower trajectory for the benchmark interest rate.
However, comments from St. Louis Fed President James Bullard, a 2019 voting member on the FOMC[4], suggest the central bank will insulate the US economy with an “insurance cut” as the official insists that a reduction of “50 basis points would be overdone.”
Moreover,
