Gold News

Gold Price Trading Dead-Flat, Stock Market Volatility Also Missing as US Fed Wins 'PR Drive' on Interest Rates

The GOLD PRICE held virtually unchanged in London bullion trading on Wednesday, heading into the end of February with its lowest daily volatility in almost 6 months as global stock markets also held flat for a 5th session running and new US GDP data left traders betting that the Federal Reserve's interest rate will end 2024 exactly where the US central bank itself forecasts.
Scheduled to meet and issue new 'dot plot' forecasts in 2 weeks' time, the Fed predicted in December that it will cut US Dollar interest rates 3 times in 2024 from the current level of 5.33% per annum – the highest effective Fed Funds rate in more than 2 decades.
Betting on end-2024 Fed rates, however, put the market's consensus forecast on the day of that prediction at 3.88%, falling still lower to 3.68% by mid-January.
But it has since risen as Fed officials switch to 'hawkish' comments about the dangers of cutting rates too early – risking a rebound in inflation – briefly topping the Fed's own 4.60% forecast level yesterday, according to the CME derivatives exchange's FedWatch tool.
Last time the market consensus for Christmas 2024 interest rates was this high, the Fed was forecasting a year-end rate of 5.10%, and the Dollar gold price was trading $100 per Troy ounce lower than today's level of $2030, almost dead-flat for this week so far and the month overall.
Chart of US Dollar gold price (right, inverted) against futures' market and US Fed's own forecasts for end-2024 interest rates. Source: BullionVault
"Pretty fantastic how the Fed's PR drive to get markets expectations of rate cuts aligned with their dot plot has triggered [such] little market volatility," says a trading note from strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp.
For tech stocks and Bitcoin, "there's complacency with no fear being priced in," says Shiels. 
"Precious markets [are meanwhile] pretty contained. Drivers seem muted and [there's] no catalyst [right now]. Even positioning isn't driving metals prices."
Watch or listen to our Gold Market Reports on YouTube.
Volatility in London gold bullion has fallen as February ends, dropping to the lowest level since September last year on BullionVault analysis with a reading below 9% on a rolling 1-month analysis of the daily 3pm benchmark price in Dollar terms.
That contrasts with gold's prior 5-year average volatility of 13.2%.
Over in China – gold's No.1 consumer and central-bank buying nation – the Shanghai Gold Exchange's AM and PM benchmark prices have varied by just 0.1% high to low so far this week.
While keeping Shanghai prices just ¥3 per gram below early Feb's pre-Lunar New Year gold all-time high of ¥483, that's the tightest 3-day range since early July, and it contrasts with a typical 3-day range over the past 12 months of 0.9%.
Over in the stock market – and with New York's major indices slipping lower from the weekend's new all-time highs – the MSCI World Index of developed-economy equity prices has now flatlined for 4 sessions since jumping to a fresh record last Thursday on the earnings beat from AI chipmaker Nvidia (Nasdaq: NVDA).
So-called crypto currency Bitcoin – approved for ETF trust funds only last month – meantime rose almost 5% on Wednesday, with BTC USD briefly topping $60,000 for the first time since November 2021's record peak, after which it sank by more than 75% inside a year.
US economic growth was today revised slightly lower for the final quarter of 2023 from last month's first estimate, coming in at 3.2% annualized after the GDP price index was revised up to show 1.7% inflation with the core PCE measure of the cost of living – the Fed's preferred inflation gauge – also revised up to a 2.1% annual increase.
The Fed's December dot-plot forecasts said that policymakers on average expected US economic growth to slow to 1.4% this year, with core PCE inflation running at 2.4% per annum.
In contrast to gold's lack of volatility above $2030 per Troy ounce, the silver price fell ahead of today's US GDP and inflation revisions, dropping to 2-week lows beneath $22.30 before rallying by 20 cents only to erase that rebound in later London trading.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver, platinum and palladium market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals