Fed keeps rates at 23-year highs, gold surges

Posted on by

Fed Sees Three Rate Cuts in 2024Fed

The Federal Reserve kept its key interest rate unchanged at Wednesday’s meeting, but signaled that three rate cuts are still expected in 2024. That leaves the Fed’s benchmark rate at a 23-year high of 5.25% to 5.5% for the fifth meeting in a row.

Deciphering the Fed’s “dot plot.”

The Fed released its latest rate cut projections, a chart known as the “dot plot.” Officials kept their forecasts in place signaling that they expect to lower the federal funds rates three times during 2024, dropping it to 4.5% to 4.75% by year’s end.

Markets react.

In the minutes immediately after the Fed meeting announcement stocks fell, gold surged higher, Treasury yields climbed, and the U.S. dollar headed south. Spot gold traded at $2,171.40 in afternoon action following the announcement.

Fed’s battle with inflation isn’t over yet.

While inflation has fallen from its 2022 high at 9.1%, recent date reveals that price increases are sticky and hard to eradicate. The latest consumer price index (CPI) data dashed hopes that the Fed had gotten price increases under control.

The February core CPI posted a hotter-than-expected reading, up 3.8% annually. The rising prices of rent, auto insurance, car repairs and airline tickets contributed to the stronger-than-expected inflation reading. Prices for used cars and clothing also climbed last month.

Inflation is still above the Fed’s stated 2% target.

At Wednesday’s Fed meeting, the central bank increased its 2024 core PCE inflation forecast to 2.6%, up from 2.4%. “Inflation has eased over the last year but remains elevated,” the Fed’s statement said. “The Committee remains highly attentive to risks.”

Gold in the midst of historic run higher.

Earlier this month, gold soared to a new all-time record high as voracious buying from Chinese investors, central banks and safe-haven investor buying keep the uptrend in the precious metal intact.

Gold has served as an asset to protect and preserve wealth for 5,000 year and investors today continue to pile into this asset, which has no counterparty or government risk.

Diversification is a prudent strategy, and those investing in gold have benefited handsomely, as gold has climbed 30% over the last 16 months. Looking ahead, Wall Street still expects more gold gains. With gold price forecasts at $2,300 and even $3,000 in the months ahead, investing in gold now could lock in significant price gains for you. Do you own enough gold? Don’t get left out during this historic gold run.

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world, and the latest tangible assets news delivered to your inbox weekly.