The decision of the US Federal Reserve regarding interest rate cuts, the escalation of conflict in the Middle East, and the pressure from Republican senators on Joe Biden regarding strengthening security at the border with Mexico – these three factors have significantly influenced the price of gold in recent days.
Over the past week, we have observed significant fluctuations in the price of the precious metal. In the last few days, the price was able to rise even by 30 dollars per ounce in anticipation of the decision of the Federal Open Market Committee regarding a potential interest rate cut in the US, then recording a correction, to finally end the week on a slight plus.
– The markets did not expect the cut to happen already in January, but what mattered to analysts was the communique after the FOMC meeting regarding the Federal Reserve’s future moves, namely in March. And both the message itself, as well as the data coming from the US economy indicate that the prospect of rate cuts is rather receding – comments Michał Tekliński, a gold market expert, Goldsaver.pl.
Chance of rate cuts decreasing
Until recently, the markets estimated that the chance of lowering interest rates in March was nearly 50 percent. Nowadays (as of Monday, February 5, 10 a.m.) – according to the CME FedWatch Tool – it is only 15 percent.
– This is a result of, among other things, the US labor market data being again better than analysts’ estimates, which in turn was reacted to by the dollar, gaining in value, so the gold dipped. But then there was a rebound in the exchange rate, because the United States decided to respond to an attack on an American base on the Jordan-Syrian border at the end of last week. This could signal an escalation of the conflict and increasing tensions in the Middle East, certainly also affecting the price of the metal in the coming weeks and months. A lot can really happen here – predicts Tekliński.
Joe Biden under pressure
The internal situation in the United States can also significantly affect the prices of gold.
– And it’s not just about the presidential elections, which of course always have a big impact on the price of the metal. In Europe, we are primarily excited about the very likely duel between Donald Trump and Joe Biden, but the internal situation in the US is much more complicated. Especially in states bordering Mexico, there is increasing talk about the need to strengthen the protection of the southern border and to increase president Biden’s administration expenditure for this purpose – the expert from Goldsaver.pl notes.
The Governor of Texas and several other Republican senators are strongly insisting on this.
– This also translates into foreign policy, because the same senators who are pressuring Joe Biden about increasing financial resources for the protection of the border with Mexico, have blocked another decision to support Ukraine in terms of armament. All of this also affects the price of gold. It is therefore worth monitoring the situation, which may develop very dynamically – adds Michał Tekliński from Goldsaver.pl
