Dovish remarks from the Federal Reserve weighed on the dollar, pushing gold prices to a near two-week high.
Following unexpectedly dovish comments on US monetary policy from the Federal Reserve on Thursday, December 14, gold and silver prices surged. COMEX February gold futures settled 2.38% higher at $2044.9 per ounce. Spot gold continued its upward trend from the previous day, closing 0.44% higher at $2036.35 per ounce. [Spot gold price chart] [Market News Analysis] The market was surprised by the dovish stance of the Federal Reserve on Wednesday. Although the Federal Open Market Committee (FOMC) kept interest rates unchanged, the committee and Fed Chairman Jerome Powell shifted from hawkish rhetoric on tightening monetary policy to a more accommodative stance, including future rate cuts. The Fed's "dot plot" now shows three rate cuts (a total of 0.75%) in 2024. The market cheered the Fed's announcement, with US stock indices hitting new highs for the year, gold prices surging back above $2000 per ounce, the US dollar index falling sharply, and US Treasury yields declining. The benchmark 10-year Treasury yield fell below 4%. The overall market risk appetite has improved significantly, which should support further gains in the stock and commodity markets, at least in the short term. The Bank of England kept monetary policy steady at its regular meeting on Thursday, as expected. The European Central Bank also maintained policy stability, but ECB President Lagarde struck a hawkish tone in her press conference. Despite the US Census Bureau's release of upbeat monthly retail sales data for November, gold prices remained steady. US consumer spending unexpectedly rose 0.3%, while market participants had expected a contraction of 0.1%. October's economic data showed a contraction of 0.2%. Consumers spent heavily on automobiles, which boosted overall retail sales. The economic data appeared insufficient to affect the broader strengthening of gold prices, as the Fed's dovish guidance has shifted fundamental support, which may be beneficial in the long run. With inflation significantly down to 2%, a stable job market, and downward revisions to inflation forecasts, the Fed's new projections suggest that rate cuts will be more significant than previously anticipated, and further gains in precious metals are expected. Therefore, the stronger-than-expected US retail sales report did not support the Fed's accommodative monetary policy comments on Wednesday afternoon, which may help push gold and silver prices back from their highs. Gold experienced a rollercoaster ride in the second half of 2023, plunging in September before surging to a record high earlier this month. Mitsubishi UFJ Financial Group economists analyzed the outlook for gold in 2024. They stated, "Higher interest rates are typically unfavorable for non-interest-bearing assets, so the starting point for rate cuts is important for the outlook for gold. Gold—our most structurally bullish forecast for 2024—will hit record highs on the triple effect of Fed rate cuts, central bank demand support, and gold's role as a geopolitical hedge of last resort." George Milling-Stanley, chief gold strategist at State Street Global Advisors, said that while gold prices have recently peaked, there is still significant upside potential in the market. He stated, "When gold finds momentum, it's hard to predict how high it will go." "We're very likely to see record highs next year." In State Street's official forecast, Milling-Stanley's team believes there is a 50% chance that gold will trade between $1950 and $2200 per ounce next year. Meanwhile, the firm expects a 30% chance of prices fluctuating between $2200 and $2400 per ounce. State Street believes there is only a 20% chance that gold will trade between $1800 and $1950 per ounce. Technically, February gold futures experienced a bullish "outside day" rally on Wednesday after hitting a three-week low earlier. Bulls have an overall near-term technical advantage and have regained strength. Prices are in a nine-week uptrend on the daily bar chart. The next upside price target for bulls is a close above the strong resistance level of $2100.00 per ounce. The next near-term downside price target for bears is to push futures prices below the solid technical support level of $2000.00 per ounce.
Time:
2023-12-15 19:28
Gold and silver prices surged on Thursday, December 14, after the Federal Reserve issued unexpectedly dovish comments on US monetary policy. COMEX February gold futures settled 2.38% higher at $2044.9 per ounce. Spot gold continued its upward trend from the previous day, closing 0.44% higher at $2036.35 per ounce.
(Spot Gold Price Chart)
Market News Analysis
The market was surprised by the dovish stance of the Federal Reserve on Wednesday. Although the Federal Open Market Committee (FOMC) kept interest rates unchanged, the committee and Fed Chairman Jerome Powell shifted from hawkish rhetoric on tightening monetary policy to a more accommodative stance, including future rate cuts. The Fed's "dot plot" now shows three rate cuts (totaling 0.75%) in 2024. The market cheered the Fed's announcement, with US stock indices hitting new highs for the year, gold prices surging back above $2000 per ounce, the US dollar index falling sharply, and US Treasury yields declining. The benchmark 10-year Treasury yield fell below 4%. The overall market risk appetite has improved significantly, and should support further gains in the stock and commodity markets, at least in the short term.
The Bank of England kept monetary policy steady at its regular meeting on Thursday, as expected. The European Central Bank also maintained policy stability, but ECB President Lagarde struck a hawkish tone in her press conference.
Despite the US Census Bureau's release of optimistic monthly retail sales data for November, gold prices remained stable. US consumer spending unexpectedly rose 0.3%, while market participants had predicted a contraction of 0.1%. October's economic data showed a 0.2% contraction. Consumers spent heavily on automobiles, which boosted overall retail sales. The economic data appeared insufficient to affect the broader strengthening of gold prices, as the Fed's dovish guidance has shifted fundamental support, which may be beneficial in the long run.
With inflation significantly down to 2%, a stable job market, and downward revisions to inflation forecasts, the Fed's new projections suggest rate cuts will be greater than previously anticipated, and further gains in precious metals are expected.
Therefore, the stronger-than-expected US retail sales report did not support the Fed's accommodative monetary policy comments on Wednesday afternoon, which may help drive gold and silver prices down from their highs.
Gold experienced a rollercoaster ride in the second half of 2023, plummeting in September before surging to record highs earlier this month. Mitsubishi UFJ Financial Group economists analyzed the outlook for gold in 2024. They stated, "Higher interest rates are generally unfavorable for non-interest-bearing assets, so the starting point for rate cuts is important for the outlook for gold. Gold—our most structurally bullish forecast for 2024—will hit record highs on the triple effect of Fed rate cuts, central bank demand support, and gold's role as a geopolitical hedge of last resort."
George Milling-Stanley, chief gold strategist at State Street Global Advisors, said that while gold prices have recently peaked, there is still significant upside potential in the market. He stated, "When gold finds momentum, it's hard to predict how high it will go." "We're very likely to see record highs next year."
In State Street's official forecast, Milling-Stanley's team believes there is a 50% chance that gold will trade between $1950 and $2200 per ounce next year. Meanwhile, the firm expects a 30% chance of prices fluctuating between $2200 and $2400 per ounce. State Street believes there is only a 20% chance that gold will trade between $1800 and $1950 per ounce.
Technically, February gold futures prices staged a bullish "outside day" advance on Wednesday after touching a three-week low earlier. Bulls have an overall near-term technical advantage and have regained strength. Prices are in a nine-week uptrend on the daily bar chart. The next upside price target for bulls is a close above the strong resistance at $2100.00 per ounce. The next near-term downside price target for bears is to push futures prices below the solid technical support at $2000.00 per ounce.
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