The proposed policies of Trumponomics 2.0 are set to shake up the US economy, leading to a surge in inflationary expectations. The market is already feeling the heat, with the 5-year and 10-year US breakeven inflation rates on the rise since September 2024.
As we gear up for the 18 December FOMC meeting, where the Fed might switch gears from its dovish stance to a more cautious approach, investors are on edge.
Gold’s Rollercoaster Ride
Since our last report, Gold has seen a 7% bounce but failed to break through the US$2,710 barrier. The yellow metal took a hit last Friday, slipping below its 50-day moving average. All eyes are now on the upcoming US monetary policy decision and economic projections release on 18 December.
Rising Inflation Expectations
Market instruments are pricing in a spike in US inflation expectations, with the 5-year and 10-year breakeven rates hovering above the Fed’s 2% target. Trumponomics 2.0’s policies, including tax cuts and higher tariffs, are fueling this uptrend.
What Lies Ahead for Gold?
Gold’s long-term uptrend remains intact, but a push towards the 2.29% resistance in the 10-year US Treasury real yield could weigh on its bullish momentum. Keep an eye on the US$2,716 level as a key resistance for Gold.
In conclusion, the Fed’s shift towards a less dovish stance, coupled with Trumponomics 2.0 policies, could have far-reaching effects on the economy and your investments. Stay informed and be prepared for potential market volatility as we head into 2025.