Steady climb of gold prices, bolstered by momentum - Federal Reserve on the brink of interest rate reduction
The US Federal Reserve (Fed) is facing a power struggle involving President Donald Trump, as the Senate has confirmed the appointment of Stephen Moore, a Trump ally, as a Fed governor. This development comes amidst an ongoing dispute between the President and the Fed.
Stephen Moore, an economic advisor to the US President, was confirmed by the Senate as a Federal Reserve governor to temporarily fill the vacancy left by Adriana Kugler. Moore's tenure will begin in 2025 and last until January 2026.
Meanwhile, investors are keeping a close eye on the Fed, as it is widely expected to cut mortgage rates by 0.25 percentage points on Wednesday. However, according to Nord/LB analyst Tobias Basse, a significant cut in US mortgage rates is now less likely.
The focus on the Fed is not surprising, given the current economic climate. Gold, one of the most sought-after investments this year, set a record high the previous day, reaching approximately $3,703 per ounce on Tuesday. This makes it the most expensive gold has ever been.
The strength of the gold market can be attributed to several factors. The weakness of the dollar provides additional tailwind for investors, according to experts. Moreover, gold does not pay interest, but its disadvantage compared to fixed-income securities tends to decrease with lower mortgage rates.
Interestingly, a year ago, an ounce of gold was trading around $1,100 less. This significant increase in gold's value highlights the current economic uncertainty and the search for safe-haven assets.
The US Federal Reserve meeting could be extremely contentious, according to experts. The better-than-expected US retail sales figures had little overall impact on the markets, suggesting that the Fed's decision could have a significant impact on the economy.
In a separate development, the appeals court has intervened in the case of Fed Governor Lisa Cook. The appeals court is blocking the dismissal of Fed Governor Lisa Cook, upholding her appointment. This decision comes amidst concerns about political influence in the Fed's decision-making process.
As the power struggle between the President and the Fed continues, the markets will be closely watching the Fed's decision on mortgage rates and the potential implications for gold and the broader economy.
