Gold Shines as Fed Holds Rates, Market Awaits Dovish Signals

Gold Shines as Fed Holds Rates, Market Awaits Dovish Signals 

Since the last FOMC meeting on June 12, gold has seen significant gains, while the dollar and crude oil have underperformed. Stocks and bonds have risen as well. US macroeconomic 'hard' data has generally weakened since the last FOMC meeting, despite occasional positive blips. This weaker data has led to increased expectations of dovish shifts in rate-cut forecasts, with the market now anticipating more than the two cuts the Fed suggested for this year.

The Federal Open Market Committee (FOMC) unanimously voted to keep the benchmark rate at 5.25%-5.5%, maintaining this high level for the eighth consecutive meeting. The committee is now "attentive to the risks to both sides of its dual mandate" rather than just inflation risks. They do not anticipate cutting rates until they are confident inflation is on a sustainable path toward 2%. Acknowledgement of "somewhat" elevated price pressures and "some further progress" toward inflation goals. Job gains have moderated, and the unemployment rate has risen but remains low. The statement notes improving balance in risks to achieving employment and inflation goals.

Win Thin (BBH) noted that the Fed's stance was less dovish than some expected. No clear signal for a September cut, though a cut is still anticipated. George Goncalves (MUFG) pointed out that the statement suggests a cautious approach toward easing. Leo He (UBS) mentioned that the Fed's shift to focusing on dual mandates is more dovish but not a complete pivot. Derek Tang (LH Meyer/Monetary Policy Analytics) described the statement as balanced, not hinting strongly at a September cut. Ira Jersey (Bloomberg Intel) observed that the statement aligns with balanced expectations; Powell's press conference may provide more insights. George Catrambone (DWS Americas) highlighted the importance of timely cuts to ensure a soft landing. Neil Dutta (Renaissance Macro) expressed surprise at market resilience and expects further clarity from upcoming meetings and conferences. Erica Adelberg (Bloomberg Intel) noted potential rate cuts may impact housing and mortgage markets, but current demand is low. Ellen Zentner (Morgan Stanley) emphasized the shift in focus to the cooling labor market as a sign toward a possible September cut. Anna Wong (Bloomberg Economics) remarked that the Fed is cautious about committing to cuts, awaiting more data before the September meeting. Michael Gapen (Bank of America) stated the Fed is in a favorable position but needs more data to gain confidence. Brian Coulton (Fitch Ratings) commented that the Fed is preparing for a potential rate cut in September.

This collection of viewpoints and data highlights a cautious but progressively dovish tone from the Fed, with the market carefully analyzing each signal for hints of future rate adjustments.