Gold prices soar as Fed may soon stop raising interest rates

07/20/2023 10:01 Nhat Linh Print article

ANTD.VN - The gold market has once again started to brighten as the US Federal Reserve (Fed) looks set to soon end its current tightening cycle.

The spot gold price on the world market at 9am this morning Vietnam time is trading around 1,983.5 USD/ounce. This precious metal has skyrocketed from above 1,950 USD/ounce at the beginning of the week.

However, domestically, gold prices have fluctuated less. SJC gold this morning only increased slightly by VND50,000 per tael, to VND66.65 - 67.25 million per tael. Overall, since the beginning of the week, national gold brands have only increased by VND150,000 per tael in buying and VND50,000 per tael in selling. Meanwhile, gold rings of other brands have increased by about VND300,000 per tael, to around VND56.10 - 57.20 million per tael.

Gold prices benefit if the Fed stops raising interest rates

Gold prices are being supported by the Fed's apparent earlier-than-expected end to its tightening cycle. The CME FedWatch tool predicts a 99.8% chance that the Federal Reserve will raise interest rates by 0.25% on July 26, when the next FOMC meeting concludes. But this month's rate hike is more likely to end the Fed's streak of rate hikes that began in March 2022.

The latest CPI (Consumer Price Index) and PPI (Producer Price Index) reports show that inflationary pressures are easing and moving closer to the Federal Reserve's target of 2%.

At its peak, CPI was at 9.1% and has now fallen to 3% in June. This has added to investor optimism when combined with a 0.2% decline so far in June in the Producer Price Index (for all goods excluding food and energy).

A survey conducted by the University of Michigan found that consumer sentiment jumped to 72.6% in July, 13% higher than sentiment in June.

If the Fed has long said its monetary policy will depend on economic data, recent reports have led markets to believe that the US is approaching a “soft landing”.

CME is currently forecasting a nearly 88% probability that rates will be left unchanged at the September FOMC meeting, and a 71.8% probability in November and 64% in December for this possibility.

For the gold market, the near end of the interest rate hike cycle has investors optimistic. Experts predict that if the Fed starts cutting interest rates for the first time in the first quarter of 2024, people will see gold take off, possibly even challenging the previous record of $2,100/ounce.

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