There is no denying that the current macroeconomic backdrop is fuelling a “perfect storm” for Gold positioning the precious metal firmly on track for its biggest first quarter of the year ever since 1990.
Gold has been on a parabolic run since October last year, surging from near the $1,800 level to score back-to-back all-time record highs this month – not once, not twice, but on multiple occasions.
Earlier this month, Gold prices set a new all-time record high within touching distance of $2,200 an ounce – extending its gains by an impressive 21%, within the short space of 5 months.
After scoring its best monthly gain in three years, Gold prices have pulled back on routine profit-taking as traders square up windfall profits – ready to capitalize on the precious metals next big move.
Looking ahead, this week is all about the macroeconomics with eyes on the outcome of the Federal Reserve’s two-day monetary policy meeting.
When the Federal Open Market Committee concludes its highly anticipated policy-setting meeting on Wednesday – officials are widely expected to hold rates steady for a fifth consecutive time.
However, there’s one key element of the meeting that traders will be paying special attention to – and that’s the central bank's projections in the so-called dot plot, which has become the de facto monetary-policy forecast.
According to GSC Commodity Intelligence – the importance of the ‘dot plot’ cannot be underestimated. Historically speaking, when the dot plot shifts, it can send a powerful message to traders on the timing and scope of rate cuts. It also can reveal significant clues highlighting differences between the Fed’s official view and that of the financial markets.
Ultimately with the economy staying strong and inflation pressures still sticky, there’s going to be a lot of information embedded in those dots – which may determine the tone and market sentiment for the rest of the year.
During his testimony earlier this month, Federal Reserve Chair Jerome Powell told the Senate Banking Committee that the central bank was getting close to the confidence it needs to start lowering interest rates.
In a note to clients, analysts at GSC Commodity Intelligence wrote “that they continue to believe the Fed is ready to move and will deliver 75 basis points of rate cuts this year, starting in June”.
If the Fed’s March 2024 dot plot suggests a pivot towards rate cuts later this year – then Gold’s recent glittering performance could just be a taster of what is yet to come. Officially ushering in the beginning of a new historic Supercycle for the world's favorite precious metal.
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:
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