Gold (XAU/USD): Gold is Gaining Momentum as Fed Funds Rate Approaches the Terminal Rate

 


Gold is retesting the key resistance level at $1923.70, or the Aug 2011 high, in response to the weakening US economy and the rise in recession risks. The latest US economic data this week shows that the producer price index declined 0.5% for the month, higher than the estimate of a 0.1% decrease while December retail sales fell 1.1%, worse than the 1% forecast.

HSBC expects the Fed's final rate hike to be 50 bps at the next Fed meeting on Feb 1 to a range of 4.75%-5.00%, and cuts at next year's meetings, according to a Reuters report. From the bond market data, the 2-year US Treasury yield could already have peaked in November at 4.72%.

“The market does not believe the Fed’s insistence that they will actually go above 5% and stay there for an extended period. This is best reflected in the U.S. 2-year yield,…which is as low as it’s been since early October ’22, many Fed rate increases ago,” said Louis Navellier, founder and president of Navellier & Associates, in a note - MarketWatch.

This note contained herein is not and should not be construed as a recommendation to buy or sell. Click here to view the latest update!

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