Title: Federal Reserve Expected to Cut Rates by 50 Basis Points: How Will This Impact Gold Prices?
Investing.com — According to HSBC analysts, there is a shift in sentiment favoring a 50 basis point rate cut by the Federal Open Market Committee (FOMC) this week, rather than the expected 25 basis points (bps). This potential move could have bullish implications for gold prices in the short term.
Despite this, expectations for the total rate cuts this year remain unchanged, with HSBC economists still anticipating a 25 basis point cut. The FOMC will also provide updates on its quarterly projections for real GDP growth, unemployment, inflation, and policy rates. While minimal changes are expected for GDP growth and inflation projections, slight shifts could occur in unemployment forecasts.
HSBC predicts that the FOMC will lower its median projection for the federal funds target range at the end of 2024, signaling potential 25 basis point cuts in September, November, and December. Looking ahead to 2025, the bank forecasts further decreases in the federal funds target range, aligning with additional rate cuts over the first three quarters of the year.
If the FOMC decides to cut rates by 25 bps on Wednesday, this could impact gold prices positively, especially with extensive pricing for larger rate cuts already priced into the markets. However, analysts caution that an overbought market could limit further upside for gold, particularly with technical indicators like the RSI signaling potential challenges.
Aside from the FOMC decision, various data releases this week could also influence gold, silver, and Platinum Group Metals (PGMs). Key data to watch includes U.S. retail sales, industrial production, housing starts, jobless claims, and the leading index, as well as UK CPI and PPI, Bank of England decisions, Japan’s CPI, and UK retail sales.
In conclusion, the Federal Reserve’s rate decision and economic data releases will play a crucial role in shaping the direction of gold prices in the coming days. Investors should closely monitor these developments to make informed decisions about their financial portfolios.