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Gold Rally Continues as Fed Reaffirms Rate Cut Promises

April 1, 2024 ( Newswire) Gold continues to rally after the Fed reaffirmed its promise that three interest rate cuts are likely in 2024.

The first three weeks of March were a windfall for gold bulls. Gold smashed through five record highs earlier this month as investors chase the interest rate cuts Federal Reserve Chair Jerome Powell promised are likely to come sometime in 2024. Investors pushed gold prices higher in anticipation of the March Federal Reserve meeting, which happened on March 19-20.

In the gold markets, all eyes are on interest rates. Gold's negative correlation with interest rates is contested among economists, but the common belief that low rates are good for gold still drives significant market speculation. Gold's 2024 price action has closely mirrored commentary from Powell and the rest of the Fed's rate-setting panel. Bears won the day in February, when less-than-promising data from January's inflation report tapered expectations for rate cuts in early 2024.

The metal saw steady recovery in the weeks that followed, but its big breakout came at the beginning of March. Rabid speculation leading up to the Federal Reserve's latest meeting drove gold to new heights. Rate cuts didn't happen on March 20, but Powell and the Fed remain optimistic about the state of the U.S. economy - and the prospect of eased interest rates later this year.

Gold prices rallied following Powell's comments, climbing to $2,204.04 on Wednesday. The metal's run cooled this morning, dipping to $2,167.50 before temporarily stabilizing in the $2,180 range.

This rally wasn't limited to gold. Markets everywhere saw green yesterday as investors reacted to the Fed's newest affirmation of 2024 interest rate cuts. The S&P ended the day with a .9% gain, continuing its excellent start to 2024. Compounding investor confidence is the Fed's belief that the economy is on the right track to justify rate cuts in late 2024.

Where will gold prices go from here? Investor speculation is behind gold's current rally, but experts think mid-2024 rate cuts are more than just a possibility. CME's FedWatch tool projects a 70% probability that the Fed's June 12 meeting will yield easing interest rates. Their projections for rate reductions jump even higher in July. The market-maker anticipates an 84.2% chance that the rate-setting panel will make good on their promises to begin pulling back the throttle on interest rates during their July meeting.

For now, the gold market's fate is closely tied to the Fed's commentary. Despite rates holding steady in March, it seems that Jerome Powell et al. still think the economy is moving in the right direction to warrant lower interest rates. As long as the promise of reduced rates remains a prominent talking-point for Powell, gold's record-breaking bull run isn't going anywhere soon.

As gold investors keep their sights on the Federal Reserve ahead of anticipated 2024 rate cuts, expect gold prices to climb as each meeting draws near. In the short term, the outlook for gold is anybody's guess. Investors looking to stay ahead of the herd should pay careful attention to Fed Chair Powell's commentary as the market braces ahead of their next meeting, which is scheduled for sometime in May.

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