Fed officials hesitate on rate cuts, US Treasuries may face a new round of sell-offs, and the downside risk for gold is increasing.
February 23, 2024 - Spot gold prices fell in the European session, breaking below the $2020 per ounce mark and currently trading around $2019 per ounce. This week, gold has been supported by a weaker dollar and safe-haven buying, reaching a high of $2023.86. However, recent statements from Federal Reserve officials expressing hesitation about rate cuts have led to a bearish short-term outlook for gold. As of press time, spot gold is trading at $2019.91 per ounce, down 0.23% from its opening price of $2024.08 per ounce on Friday, February 23. A new round of US Treasury bond selling has begun. A fund manager at Fidelity International sold most of the US Treasuries held by his fund, anticipating further expansion of the world's largest economy. George Efstathopoulos, based in Singapore, helps manage approximately $3 billion in income and growth strategies for Fidelity. He sold most of his holdings of 10-year and 30-year US Treasuries in December. He is now shifting to assets that typically perform well during periods of strong economic growth to enhance returns. He stated, "We don't expect the economy to fall into recession again. While the possibility of a no-landing scenario remains small, it has been increasing. If economic growth accelerates further, we may not be talking about Fed rate cuts in 2024." This week's US Treasury bond selling intensified, with strong contract demand for the 10-year Treasury yield to break above 4.5%, a level not seen since November last year. Rising US Treasury yields will continue to put pressure on gold, and further price declines should be anticipated. Federal Reserve Governor Christopher Waller stated on Thursday that he needs to see more evidence of cooling inflation before he would support a rate cut. In a policy speech in Minneapolis, he concluded with the question, "What's the rush?" Regarding rate cuts, Waller said that the higher-than-expected inflation data in January raised questions about the direction of prices and how the Fed should respond. In his prepared remarks, Waller said, "Last week's high CPI data may have been just a bump in the road, but it could also be a warning that the considerable progress made on inflation over the past year may be stalling." While he still expects the Federal Open Market Committee (FOMC) to begin cutting rates sometime this year, Waller said he sees "mainly upside risks" to inflation. He also said that based on strong GDP and employment growth of 3.3% annualized, there is little indication that inflation will fall below 2% in the near term, nor is there much indication of a possible recession. Waller is a permanent voter on the FOMC. He said, "This makes the decision to be patient before cutting rates easier than one might think. I need to see at least a couple more months of inflation data to determine whether January was a speed bump or a pothole." These comments align with the prevailing view among other Fed officials that while further rate hikes are unlikely, the timing and pace of rate cuts remain uncertain. Earlier, Fed Vice Chair Jefferson did not comment on the pace of rate cuts, only stating that he expects rate cuts "later this year" without providing a timeline. Fed Governor Cook also spoke, noting the progress the Fed has made in lowering inflation without derailing the economy. However, while she also expects rate cuts this year, Cook said she "wants greater confidence" that inflation is on a sustainable path back to 2% before cutting rates. The 4-hour chart shows that gold has been under selling pressure for the past two trading days, although the "bleeding" appears to have stopped. Gold prices have recovered moderately from Thursday's intraday low of $2019.62. Technical indicators have lost downward momentum, with the Relative Strength Index (RSI) stabilizing around 36. Meanwhile, gold is hovering near the mildly bullish 100-period SMA, while the 20-period SMA is slightly lower, well above the current gold price level.
Time:
2024-02-24 09:24
February 23, during the European trading session, Spot gold experienced a short-term decline, breaking below the $2020 per ounce mark and currently trading near $2019 per ounce. This week, gold has been supported by a weak dollar and safe-haven buying, rising to a high of $2023.86. However, due to Federal Reserve officials frequently expressing hesitation about rate cuts in recent speeches, the short-term trend for gold is bearish.
On Friday (February 23), spot gold opened at $2024.08 per ounce. As of press time, spot gold is recorded at $2019.91 per ounce, down 0.23%.
Recently, the market has begun a new round of selling of US Treasuries. A fund manager at Fidelity International sold most of the US Treasuries held by the fund he manages, because he expects the world's largest economy still has room to expand.
Based in Singapore, George Efstathopoulos helps manage approximately $3 billion in income and growth strategies for Fidelity. He sold most of his holdings of 10-year and 30-year US Treasuries in December. He is now shifting to assets that typically perform well during periods of strong economic growth to boost returns.
He said: "We don't expect the economy to fall into recession again. While the possibility of a no-landing scenario remains small, it has been increasing. If economic growth accelerates further, we may not be talking about Fed rate cuts in 2024."
US Treasury selling intensified this week, with strong contract demand for the 10-year US Treasury yield to break through 4.5%, a level not seen since November last year.
The rise in US Treasury yields will continue to put pressure on gold, and we should be wary of further declines in gold prices in the future.
Federal Reserve Governor Christopher Waller said Thursday that he needs to see more evidence that inflation is cooling before he would support a rate cut.
In a policy speech delivered in Minneapolis, he concluded his remarks with the question: "What's the rush?"
On the issue of rate cuts, Waller said that the higher-than-expected inflation data in January raised questions about the direction of prices and how the Fed should respond. In his prepared remarks, Waller said: "Last week's high CPI data may have been just a bump in the road, but it could also be a warning that the considerable progress made on inflation over the past year may be stalling."
While he still expects the Federal Open Market Committee (FOMC) to begin cutting rates sometime this year, Waller said he believes inflation "faces significant upside risks." He also said that based on strong GDP and employment growth of 3.3% annualized, there is little indication that inflation will fall below 2% in the near term, and little indication of a possible recession.
Waller is a permanent voter on the FOMC. He said: "This makes the decision to be patient before cutting rates easier than one might think. I need to see at least a couple more months of inflation data before I can tell whether January was a speed bump or a pothole."
The above remarks are consistent with the prevailing view among other Fed officials that while further rate hikes are unlikely, the timing and pace of rate cuts remain uncertain.
Earlier, Fed Vice Chair Jefferson did not comment on the pace of rate cuts, only saying that he expects rate cuts "later this year," but did not provide a timeline. Fed Governor Cook also spoke, noting the progress the Fed has made in lowering inflation without derailing the economy. However, while she also expects rate cuts this year, Cook said she "wants greater confidence" that inflation is on a sustainable path back to 2% before cutting rates.
The 4-hour chart shows that although the "bleeding" seems to have stopped, gold has been under selling pressure for the past two trading days. Gold prices have recovered mildly from Thursday's intraday low of $2019.62 per ounce. Technical indicators have lost downward momentum, with the Relative Strength Index (RSI) stabilizing around 36. Meanwhile, gold is hovering near the mildly bullish 100-period SMA, while the 20-period SMA is slightly lower, well above the current gold price.
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