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Fed Rate Expectations Diverse, Bringing Gold Down
Fed Rate Expectations Diverse, Bringing Gold Down
Wednesday, 24 January 2024

Price Performance Indicators

Product 

Price

% change

GOLDUD

$2,029.06

-1.19%

GOLDGR

Rp1,029,800.00

-0.72%

XAUUSD

$2,029.62

-1.22%

COMEX

$2,026.00

-1.40%

USD/IDR

Rp15,628.00

0.47%

Gold focus :

1.    ICDX gold price weakened 1.19% in a week (15/1-19/1).

2.    various Comments of Fed officials.

Market Review

ICDX gold prices weakened at 1.19% compared to the previous week with the focus on strong Chinese economic data while the market was also waiting for a decision on interest rates, whether the Fed maintained interest rates or started lowering interest rates.

On 17/1 the National Bureau of Statistics (NBS) showed China's economy grew at an annual rate of 5.2% in the final quarter of 2023 when compared to 4.9% expansion in the third quarter. On a quarterly basis, China's Gross Domestic Product (GDP) rose 1.0% in the third quarter versus 1.0% forecast and 1.3% posted last

On the other hand, the market has priced in the possibility of an interest rate cut occurring at the March meeting. Atlanta Federal Reserve (The Fed) Raphael Bostic said at the weekend that interest rates should remain on hold until at least the summer to prevent prices from rising again. In addition, the performance of the US Dollar gained strength after the Governor of the Federal Reserve (The Fed) Christopher Waller said on 16/1 that the market had reduced expectations for an interest rate cut in March. Waller said although the US is within striking distance of the 2% inflation target set by the Fed.

On 1/19, San Francisco Federal Reserve President Mary Daly said that monetary policy is currently in good shape and risks to the economy are balanced. Mary Daly advises lowering interest rates with extreme caution, keeping in mind that a return of inflation to the 2% target should not be compromised. He said the Fed would focus on maintaining full employment this year as opposed to its agenda of ensuring price stability.

On the geopolitical tension side, in news circulating, the United States launched a new attack on Houthi anti-ship missiles aimed at the Red Sea on 18/1. The US has carried out a fifth strike against Houthi rebel targets in Yemen, while Joe Biden acknowledged that rebel attacks on shipping in the Red Sea were continuing despite bombing.

Market View

Interest Rate Decline Bets By The Fed

Looking at the Fed's policy at the January 30-31 meeting. At the previous meeting, Fed policy makers began raising interest rates in March 2022 to reduce high inflation. The Fed last increased interest rates in July to the range of 5.25%-5.50%. Dot plot projections released on December 13 showed that eight members predicted interest rate cuts of at least 75 bps next year while five others predicted interest rate cuts of more than 75 bps. The median interest rate expectation was 4.6% in the latest dot plot, down from 5.1% in the September projection.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Date

Data/Events

Actual

Ekspektasi

Sebelumnya

25-Jan

US -  Durable Goods Orders MoM

-

5.5%

1.1%

25-Jan

US -  GDP Growth Rate QoQ Adv

-

4.9%

2%

26-Jan

US - Core PCE Price Index MoM

-

0.1%

0.2%

Source: ICDX Research

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© Indonesia Commodity & Derivatives Exchange (ICDX)
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