Gold and silver prices both increased in today's trading session as global investors "hold their breath" waiting for the US Federal Reserve's monetary policy decision, scheduled to be announced at 2:00 p.m. on Wednesday (US time) after the last FOMC meeting of 2024. In addition, Fed Chairman Jerome Powell's press conference was also of particular interest to analysts, as this could be an important signal for policy orientation in 2025.
The market is betting on the Fed's interest rate cut
According to data from Trading Economics, the market is almost completely confident in the possibility of the Fed cutting 25 basis points this session. The CME FedWatch tool shows an 87% probability of a rate cut, reflecting widespread expectations that the policy easing cycle is entering the early stages.
However, experts also warn of the possibility of a "Havy rate cut" - meaning the Fed could signal a temporary suspension of early interest rate cuts in 2025 if inflation has not really cooled down. Some analysts believe that despite the pressure to cut interest rates, the Fed will still be cautious to maintain market confidence in the goal of controlling prices.
In addition to policy factors, recent US employment data also plays an important role in shaping the Fed's decision. Although the Ministry of Labor recorded a slight increase in the number of layoffs in October, the JOLTS report showed that the number of recruitment positions increased to 7.67 million, reflecting the stable health of the labor market. This development helps the Fed have more room to adjust policy without worrying about the economy getting too hot or falling into recession.
The thirst for gold of central banks has not stopped
The loose monetary policy and strong buying momentum of central banks are creating a solid foundation for the precious metals market. Notably, the People's Bank of China (PBoC) net bought gold for the 13th consecutive month in November, bringing its total reserves to more than 74.12 million ounces. This move comes in parallel with steady buying from many other central banks and large inflows into the SPDR Gold Shares (GLD) ETF - a testament to the strong safe-haven demand.
According to experts, the fact that global central banks are stepping up gold purchases is not only to diversify foreign exchange reserves but also reflects concerns about the risk of currency depreciation and geopolitical instability. This is a long-term factor that has helped gold increase by more than 60% since the beginning of the year, the increase is considered historic.
Not everyone believes that this increase will last long. The derivatives market is now only predicting two rate cuts in 2025, down from three last week, said Alex Kuptsikevich, chief analyst at FxPro.
This reflects expectations that the Fed could act more cautiously if inflation remains persistent or the US economy remains strong enough.
As of the end of today's session, the February 2025 gold contract increased by 30.3 USD (0.72%), to 4,213.2 USD/ounce; the March silver contract increased by 2.57 USD (4.38%), reaching 61.07 USD/ounce.
The precious metal's breakthrough shows the optimistic sentiment that is engulfing the market ahead of the Fed's meeting. Investors believe that, despite the Fed's warning message, gold will still maintain its position as the safest "storm shelter" in the context of the global economy entering a new period of uncertainty.
