Despite the delay in expectations regarding Federal Reserve rate cuts, the rally of gold remains unabated. ANZ Bank economists delve into the outlook for the precious metal.
Macroeconomic and geopolitical backdrop remains supportive
The timing and trajectory of Federal Reserve rate cuts serve as significant long-term factors for Gold. Presently, the FOMC seeks greater assurance of inflation returning to the 2% mark before contemplating any cuts. Our projection suggests that these cuts will likely commence from July of this year. However, market sentiment indicates that cuts may not materialize until the second half of 2024. Nonetheless, the recent shift in market expectations from March to June could potentially constrain the upward momentum of gold prices.
The possibility of a change in the US governing party introduces uncertainties regarding future policies. Amidst ongoing economic and geopolitical tensions, equity markets are reaching unprecedented highs. This trend may instill a sense of caution among investors, prioritizing downside risks over potential gains. As the US elections draw nearer, heightened volatility is anticipated. In the event of a risk-off sentiment prevailing in equity markets, Gold prices are expected to receive support.
