Price Performance Indicators

Gold focus :

1. ICDX gold prices fell 3.49% in the week (25/09 - 29/09).
2. US PCE data and projections of tighter US interest rates.

Market Review

ICDX gold prices corrected 3.49% compared to the previous week, overshadowed by the prospect of tighter US central bank monetary policy supported by inflation data and trade data which is still strong. Several Fed officials expressed support for the higher for longer narrative.

The core US personal consumption expenditures (PCE) price index, excluding food and energy costs, rose 3.9% year-on-year in August after increasing 4.3% in July while recorded the first sub-4.0% increase since June 2021. Meanwhile overall , US PCE in annual terms increased 3.5% from the previous month's 3.4% increase. US PCE is the inflation measuring data that the Fed preferred to use when determining monetary policy. The US Department of Commerce report also showed US durable goods orders increased sharply at a pace of 0.2% from a decline in July which was revised to -5.6% from -5.2% previously reported. Inflation data which is still far from the US central bank's 2% target and optimistic trade data strengthen economic expectations providing room for further tightening of the Fed's monetary policy.

Minneapolis Fed President Neel Kashkari revealed that he was on the hawkish side, adding that if the economy were fundamentally stronger, then interest rates would need to be slightly higher and then maintained for a longer time. New York Fed President John Williams assesses that we are currently near the top of the interest rate target range and estimates that it will be necessary to maintain tight monetary policy for some time to fully restore the balance of supply and demand to bring inflation to the desired level. Williams also conveyed the prospect of inflation at 3.25% this year, 2.5% next year, and approaching the target of 2% in 2025.

Market View

September's FOMC Meeting Result

The US central bank kept its benchmark overnight interest rate at 5.25%-5.50% at its September 19 - 20 Federal Open Market Committee (FOMC) meeting, but sketched a tighter policy path in an effort to fight inflation that is expected to last through 2026. Chairman Fed Jerome Powell said a solid economy with still strong job growth allows the central bank to maintain additional pressure on financial conditions through 2025. The Fed updated their interest rate projections for 2024 from the previously projected 4.6% to 5.1% and 3.9% at the end of 2025. While inflation is projected to be 3.3% at the end of this year, 2.5% in 2024 and to 2.2% at the end of in 2025. The Fed expects inflation to return to its 2% target in 2026, slower than some policymakers expected. Sentiment on US interest rate policy is in focus due to higher interest rates increase the opportunity cost of holding gold bullion thereby dimming gold's appeal.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research