Comment by Ghazal Jain, Fund Manager- Alternative Investments, QAMC
There's growing consensus that the rate hiking cycle in the US is over given softer labour market data and slowing inflation numbers coming out of the US economy. The Fed is widely expected to leave rates unchanged at 5.25% to 5.50% at its December meeting. Markets are also expecting roughly 125bps of cumulative interest rate cuts by December 2024, with the first cut expected as soon as March 2024. These renewed expectations of softer Fed policy in 2024 are driving down US yields and US dollar and driving up gold.
While we too are cautiously optimistic that the rates have peaked, which should keep gold well supported, rate cut expectations and the upmove in gold is vulnerable to a reversal in the short term in case of a higher for longer Fed stance or hawkish Fed commentary to push back against market expectations and loosening of financial conditions.
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