Gold prices are at $2,405 an ounce this Monday morning, increasing from $2,396 an ounce last Monday.
The most notable report from last week was the second quarter GDP (Gross Domestic Product), which was higher than expected at 2.8 percent. The report dispelled speculation that the Federal Reserve would cut interest rates at this week's FOMC meeting.
There is a widespread belief that gold prices have an inverse relationship with decreased interest rates. The idea is that since lower interest rates make fixed-income investments like bonds less attractive, money will flow into Gold and high-yielding investments as rates decrease. However, it's important to note that historical data shows less of a correlation (only 28%) between lowering interest rates and increasing gold prices, providing a more nuanced understanding of the market.
While monetary policy may influence gold markets, many other factors affect supply and demand and, ultimately, the direction of precious metal prices.
Given the stock market's historical tendencies and gold prices' actual reactions to interest rate decreases, decreasing interest rates are more likely to impact stock prices positively. Gold may benefit as an alternative investment to volatile equities.
Potential market-moving events for this week include:
- Wednesday: FOMC interest-rate decision and Fed Chair, Jerome Powell, press conference
- Thursday: Initial Jobless Claim
- Friday: U.S. Unemployment Rate
Look for the Federal Reserve Chairman, Jerome Powell, to give guidance on a potential interest rate cut after the September FOMC meeting. If Friday's unemployment rate continues to increase over last month's 4.1 percent, it only increases the chance of a September and beyond interest rate cuts from the Federal Reserve, potentially shaping the future trends in the gold market.
According to CME Group's FedWatch tool:
- September 17-18 Fed meeting: Investors see a 100% chance of a cut by this meeting, including a slim 11.3% chance of 50 basis points.
- November 6-7 Fed meeting: Investors see a 67.9% chance of at least 50 basis points in cuts by this point.
- December 17-18 Fed meeting: Markets see a 97.8% chance of at least 50 basis points in cuts. They are pricing in a 63.9% chance of 75 basis points in Fed rate cuts.
In other news, fears grow of a wider war between Israel and Hezbollah after a rocket attack in the Israeli-occupied Golan Heights that killed 12 children last week. Israel blamed Hezbollah for the attack and said the militant group will "pay the price." Since October 7th, 2023 - the regional conflict involving Israel has increased demand for Gold whenever it flares up.
Join us on August 8th when we host a live webinar, "Why Do Tangible Assets Matter?" We will compare tangible assets like Gold bullion and investment grade against intangible stocks and bonds. We will also compare tangible precious metal investments against tangible assets like real estate. To register, click here.
Posting in:
byUnited States Gold Bureau