Friends, buckle up! Gold is on a tear, leaping 1.81% yesterday to $3361.30/oz on COMEX, and Shanghai gold followed suit with a 1.02% climb. Why? Because the narrative is shifting, and it’s finally shifting in a direction gold bugs like us have been anticipating for months!
We’re seeing a concerted effort – almost a coordinated chorus – of dovish signals from within the Federal Reserve. Kashkari is reporting companies are prepping for potential layoffs due to persistent uncertainty. Waller’s hinting that rate cuts may be coming as unemployment ticks up. And Harker is preaching patience, emphasizing the Fed stands ready to act if necessary. It’s about time!
Even Trump is adding fuel to the fire, openly demanding the Fed cut rates and decrying their perceived sluggishness. While I usually wouldn’t cite political commentary, the pressure is undeniably mounting.
Now, let’s break down the probabilities. CME’s FedWatch tool shows a 91.7% expectation for no change in May, but a growing 8.3% chance of a 25bp cut. More importantly, June is looking less certain. Rate hold probability drops to 37.3%, while a 25bp cut jumps to 57.8%. A bolder 50bp cut? Still a long shot at 4.9%, but it’s moving.
Let’s talk about the implications of this shift in sentiment.
Firstly, a dovish Fed generally weakens the dollar, making gold more attractive to international investors. It’s simple economics, folks.
Secondly, rising unemployment concerns, as highlighted by Waller, suggest a slowing economy, increasing gold’s safe-haven appeal. Investors flock to gold during times of economic stress.
Thirdly, central bank communication is key. These signals aren’t accidental; they are designed to manage market expectations. Watch closely how the market interprets these evolving views.
This isn’t just about numbers; it’s about sentiment, and sentiment is powerful. Keep a close eye on these developments, as a significant shift in expectations is brewing. Get ready for potential volatility, but remember – gold loves uncertainty!
