Gold prices surged to a three-week high during trading yesterday (Friday). The price action was powered by a growing belief that the Federal Reserve will begin its rate cutting cycle earlier than planned. The market consensus is now that the pivot will begin as soon as March with more cuts, and a higher overall cut of 155 base points will occur in 2024.
This consensus has heaped pressure on the dollar, which has struggled to tread water, and Treasury yields, which have also faded away and are now down at their lowest level since July. The removal of these two key barriers has given the bulls road to run. The precious metal is trading around the £1,614 ($2,051) area this morning (Friday) with a run to £1,652 ($2,100) entirely possible even as the end of the year beckons.
One of the reasons for market optimism comes in the form of a revised growth estimate. It had been estimated that the U.S. economy had grown by 5.2% in the third quarter. However, this annualized rate has now been revised down, with actual growth sitting at 4.9%.
Today will be an important day and could see gold take a huge leap forwards as the latest inflation data is expected. Should we see a drop in inflation levels, it would further support rate cut hopes and pile even more pressure on the greenback, favouring the bulls. We’ve already seen this to be the case at home, with the UK inflation data issued this week surprising to the downside. It fell notably in November to the lowest rate recorded in the last two years – meaning the Bank of England could also begin the process of reversing interest rate increases handed down over the last 18 months.
We may be racing towards the end of the year but it’s clear the gold bulls aren’t done yet. Don’t let 2023 slip past without further boosting your portfolio with this strategic asset. Buy now before prices spike higher.
