The price of gold remained high on Monday after hitting a record of $2,194.99 an ounce on Friday as investors expect the Federal Reserve to cut its key interest rate soon.
Gold has climbed by 5.72 percent since the beginning of the year, according to Trading Economics, as the market places its bets on the U.S. central bank cutting interest rates as a result of a cooling labor market and slowing inflation.
As of Monday morning, gold was priced at $2,179, as per data from Markets Insider. While slightly lower than the record reached on Friday, it was still much higher than a month ago. On February 12, gold was priced at $2,013.43.
Since then, the price of gold has been steadily rising as the U.S. labor market, which remained strong in the past few years, recently showed signs of cooling.
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While the U.S. job growth accelerated last month, the unemployment rate climbed to a 2-year high of 3.9 percent, as per data shared by the Labor Department, and wage growth slowed more than anticipated.
This increase in the number of unemployed makes it more likely that the Fed will finally cut interest rates, a move that the central bank hasn’t taken yet, despite announcing in December the end of its aggressive rate hike campaign.
According to Trading Economics, nearly 60 percent of traders currently think it possible for the Fed to cut its key rate by 25 basis points in June. Several economists recently told Bloomberg Economics that they now expect the Fed to cut rates as early as May.
The Fed’s Chair Jerome Powell recently suggested that interest rate cuts may be coming soon if inflation backs them up, though he did not offer a timeline for them.
“We’re waiting to become more confident that inflation is moving sustainably at 2 percent. When we do get that confidence, and we’re not far from it, it’ll be appropriate to begin to dial back the level of restriction,” Powell said in remarks to the Senate Banking Committee last week.
The Fed chair said that the cuts will happen when the central bank is sure they won’t “drive the economy into recession rather than normalizing policy as the economy gets back to normal.”
Whether the price of gold will continue going up or will weaken is likely to depend on the U.S. Consumer Price Inflation (CPI) data for February, which will be released on Tuesday.
Should the CPI follow expectations, with inflation continuing to slow, the price of gold is likely to continue rising. Should the CPI show higher-than-expected inflation, the price of gold might cool as the Fed would be likely to continue waiting before cutting rates.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.