With further cuts likely before the end of the year, non-interest-bearing assets such as gold have become increasingly attractive to investors. As Philadelphia Fed Chairman Patrick Harker noted, the Fed balances “hard” and “soft” economic data to effectively manage the economy in uncertain times.
Fed Governor Michelle Bowman expressed caution, preferring a smaller rate cut due to ongoing inflation concerns, while Governor Christopher Waller backed the 50 basis point cut but hinted at a possible pause depending on future economic data.
Impact of economic growth prospects on gold
While rate cuts generally benefit gold, the Fed’s optimistic outlook for US economic growth could limit further gains. The central bank expects annual growth of around 2.0% until 2027, indicating a potential “soft landing” rather than a significant downturn.
This growth forecast reduces the need for safe-haven assets, suggesting that gold prices could face downward pressure if the US economy continues to perform well. Investors may shift their focus from gold as confidence in economic resilience grows.
Key data to watch: PMI and market sentiment
The US Purchasing Managers Index (PMI) will be released later today. A stronger-than-expected PMI reading could boost the dollar, putting downward pressure on gold.
Traders will be closely watching this data, as well as ongoing geopolitical developments in the Middle East, where rising tensions could further support gold’s safe-haven appeal.