18 December 2023
Gold prices have escalated to nearly historic levels, fueled by an unexpected dovish pivot from the Federal Reserve, which has heightened gold’s appeal among investors. Despite Consumer Price Index (CPI) data meeting expectations and initially causing a subdued reaction in the market, gold swiftly rebounded, approaching $1990 per ounce. Caught off guard by the Federal Reserve’s dovish statements, economic forecasts, and Chair Jerome Powell’s remarks, the market reacted sharply.
The Fed, keeping its benchmark interest rate at a 22-year peak (5.25% to 5.50%), hinted at more substantial rate cuts in 2024, up to 0.75%—greater than the 0.50% cut anticipated in September. This adjustment in inflation outlook and the prospect of multiple rate reductions prompted market shifts: a weakened U.S. dollar, increased Treasury yields, a rally in U.S. stocks, and a significant rise in gold prices, breaking the $2000 per ounce barrier.