• Gold about to mark third weekly profit in row
• Dollar weakness boosts gold futures
• Gold could target $2700 for first time ever

Gold prices rose in European trade on Friday, extending gains for the second session and trading above $2600 at record highs, while about to mark the second weekly profit in a row as the dollar lost ground.

The Fed commenced a new cycle of policy easing this week by a larger than expected 0.5% interest rate cut, while preparing for similar cuts this year and the next.

Prices

Gold prices rose over 1% today to $2612 an ounce, with a session-low at $2584.

Gold prices rose 1.1% on Thursday, marking the first profit in three days and resuming gains after a short wave of profit taking.

Weekly Trades

Gold prices are up 1.5% so far this week, about to mark the third weekly profit in a row amid strong investment demand on the precious metal.

The Dollar

The dollar index shed 0.25% on Friday, extending losses for the third straight session and about to plumb 14-month lows at 100.22 against a basket of major rivals.

A weaker dollar makes greenback-denominated gold futures cheaper to holders of other currencies.

The decline came after the Fed issued an aggressive interest rate cut by 50 basis points, and forecast a similar cut by the end of the year.

The Fed

The Federal Reserve announced an interest rate cut of 50 basis points from 5.5% to 5%, while many analysts expected a smaller 0.25% cut.

It’s the first decision of its kind in 2020, and puts an end to the latest cycle of policy tightening, which started in March 2022.

The Fed expected a similar cut by the end of 2024, and also expected a 1% cut in 2025, and a 0.5% cut in 2026. 

The Fed’s statement expressed confidence that inflation is sustainably heading towards 2%, and that the risks facing employment and inflation have become balanced. 

Outlook

The Fed expects the growth rate to hold at 2% in 2024, 2025, and 2026.

It also expects the unemployment rate at 4.4% in 2024 and 2025, before falling to 4.3% in 2026. It reduced the outlook for inflation to 2.6% in 2024, then to 2.2% in 2025, and 2% in 2026.

Powell

Fed Chair Jerome Powell said on Wednesday, the Fed isn’t in a hurry about rate cuts, adding he doesn’t see recession risks in the US.

The Fed Chair asserted the US economy continues to grow at a strong pace, while unemployment is holding below 4%.

He adds that policy tightening efforts, which the Fed implemented since mid-2022, has borne results. 

US Rates

According to the Fedwatch tool, the odds of another 0.5% Fed rate cut in November stood at 35%, while the odds of a 0.25% rate cut stood at 65%.

The SPDR

Gold holdings at the SPDR Gold Trust rose 1.73 tonnes yesterday to a total of 873.96 tonnes, the highest since January 3.

• Sterling about to mark largest weekly profit in a month
• The odds of a November UK rate cut recede
• BOE seeks more evidence before rate cut 

Sterling rose in European trade on Friday against a basket of major rivals, extending gains for the third straight session against the dollar and hitting 30-month highs, and about to mark the largest weekly profit in a month after strong UK data.

The data confirmed the flexibility of the UK economy, and in turn reduced the odds of a November Bank of England rate cut in November.

The BOE decided to maintain interest rates unchanged on Thursday as expected, asserting the need for more evidence before any rata cuts.

The Price

The GBP/USD pair rose 0.4% today to $1.3340, the highest since March 22, with a session-low at $1.3273.

The pair closed up 0.55% yesterday, the second profit in a row following the BOE’s policy decisions.

Weekly Trades

Sterling is up 1.6% so far against the dollar this week, about to mark the largest weekly profit since mid-August.

Sterling is now the best performing G8 currency in 2024 due to expectations of high UK interest rates for an extended duration.

Strong Data.

Recent data showed UK retail sales rose 1% in August, beating estimates of 0.3%.

The data, in addition to positive GDP growth data for the second quarter, underlines the resilience of the UK economy.

UK Rates

Following the aforementioned data, the odds of a November BOE rate cut fell to less than 30%, with a 40% chance of a rate cut in December.

The BOE

The Bank of England voted to maintain interest rates unchanged at 5%, and said it’s important to be cautious and not rush into interest rate cuts.

The decision was voted upon with a 8-1 majority.

The BOE cut interest rates at the August meeting, in what was the first rate cut since 2020.

Bailey

BOE Governor Andrew Bailey said the central bank needs to see more evidence and supportive signs before taking the decision to cut interest rates.

He expressed optimism that inflation is receding clearly in the country, which would eventually pave the path for policy easing.

The Interest Rate Gap

The US-UK interest rate gap vanished this week after the Federal Reserve cut interest rates by 50 basis points.

The gap could reform once again this year in favor of the UK if the Fed went ahead with more aggressive rate cuts compared to the Bank of England.

US stock indices rallied on Thursday to fresh record highs amid surging optimism following the Fed’s policy decision yesterday.

The Fed decided to cut interest rates by 50 basis points to 5%, while expecting a similar cut by the end of 2024.

The markets’ response to the decision yesterday was muted amid concerns that the decision was taken in preparation for a potential US economic recession.

However, the concerns were alleviated today, especially after data showed US unemployment claims fell by 12 thousand to 219 thousand, while analysts expected 229 thousand. 

On trading, Dow Jones rose 1.2%, or 478 points as of 17:08 GMT to 41,982, while S&P 500 rose 1.8%, or 100 points to 5718, as NASDAQ rallied 2.8% to 18,058.

• World’s most valuable cryptocurrency targets $65000
• The Fed cut interest rates aggressively 

Bitcoin rose on Thursday on track for the third profit in a row, marking three-week highs as risk appetite surged in the markets.

The gains came after the Federal Reserve issued a large 0.5% interest rate cut yesterday, and expected even more cuts this year and the next.

The Price

Bitcoin rose 2.4% at Bitstamp today to $63,221, the highest since August 27, with a session-low at $61,584.

On Wednesday, bitcoin rose 2.4%, marking the second profit in a row following the Fed’s policy meeting.

Crypto Market Value 

The market value of cryptocurrencies rose by $88 billion today to $2.258 trillion, the highest since August 27, as both bitcoin and ethereum gained ground.

The Fed

The Federal Reserve announced an interest rate cut of 50 basis points from 5.5% to 5%, while many analysts expected a smaller 0.25% cut.

It’s the first decision of its kind in 2020, and puts an end to the latest cycle of policy tightening, which started in March 2022.

The Fed expected a similar cut by the end of 2024, and also expected a 1% cut in 2025, and a 0.5% cut in 2026. 

The Fed’s statement expressed confidence that inflation is sustainably heading towards 2%, and that the risks facing employment and inflation have become balanced. 

US Rates

According to the Fedwatch tool, the odds of another 0.5% Fed rate cut in November stood at 35%, while the odds of a 0.25% rate cut stood at 65%.