Gold Looses Momentum after Changing FED Expectations
November 15, 2024 (Investorideas.com Newswire) Investorideas.com (www.investorideas.com), a go-to platform for big investing ideas releases market commentary from Quasar Elizundia, Expert Research Strategist at Pepperstone.
"Gold prices are experiencing their worst operational week since 2021, adding to a bearish performance that has emerged after the yellow metal reached new historical highs. Over the past few weeks, this trend has left XAU/USD with a value loss of nearly 8%.
The strength of the US dollar and the shift in expectations regarding Federal Reserve rate cuts have pressured a precious metal that had been in a significantly extended bullish trend, reflecting gold's sensitivity to monetary policy expectations. Recently, Fed Chair Jerome Powell emphasized there is no rush to cut rates, pointing to the "notable" performance of the economy.
The economic outlook is also being shaped by expectations surrounding the new Trump administration, which may pursue policies of higher trade tariffs, tax cuts, and deficit-driven public spending. Such an approach could trigger higher inflation and borrowing costs, leading to tighter monetary policy and reducing gold's comparative appeal.
Recent data on the Consumer Price Index (CPI) and the Producer Price Index (PPI) have shown a stall in inflation reduction, prompting investors to reconsider the likelihood of a rate cut in December. In the short term, gold's outlook may continue to face negative pressures, with upcoming economic data potentially further influencing market sentiment. However, in the medium to long term, I believe gold remains a key asset for hedging against economic uncertainty.
Additionally, the potential introduction of new import tariffs targeting economic partners like China and the European Union could disrupt global trade, strengthening gold’s appeal as a safe-haven asset amid growing economic uncertainty."
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