Gold Price Talking Points
Fresh developments coming out of the Federal Reserve is likely to influence the price of gold[1] as the central bank is widely expected to deliver another rate cut in October.
Fundamental Forecast for Gold: Bullish
The price of gold trades within the monthly opening range ahead of the Federal Open Market Committee[2] (FOMC) interest rate decision, but the precious metal may exhibit a more bullish behavior amid the weakening outlook for the US economy.
The US Gross Domestic Product (GDP) report may further the case for another Fed rate cut as the update is anticipated to show the economy growing 1.6% in the third quarter of 2019 after expanding 2.0% during the previous period.
At the same time, Personal Spending is expected to increase 2.5% following the 4.6% rise during the three-months through June, and the slowdown in private-sector consumption may become a growing concern for the FOMC as household spending “has been the key driver of growth.”
In response, the FOMC may continue to reverse the four rate hikes from 2018 especially as “US President Donald Trump tweets that the “Fed was way too fast to raise, and way too slow to cut.”
Moreover, Fed Fund futures reflect a greater than 90% probability for another 25bp reduction on October 30, and Chairman Jerome Powell and Co. may continue to endorse a dovish forward guidance amid the ongoing shift in US trade policy.
However, it remains to be seen if Fed officials will project a lower trajectory for the benchmark interest rate as a few participants judged “that it might become necessary for the Committee to seek a better alignment of market expectations regarding the policy rate path with policymakers' own expectations for that path.”
