Federal Reserve statements lead to widespread losses for gold and stocks

Christopher Waller, a member of the Federal Reserve, said that a quick rate cut is not possible at this time.

Waller also said that the Fed could cut rates in 2024 if inflation does not rebound and rise again. He did not specify a date for the cut, but he confirmed that it would be a cautious and scientific process.

The markets reacted to Waller’s statements with some hesitation, with expectations of a March rate cut falling from 70% to less than 60% at present.

This helped the dollar index to rise 0.97% to exceed the 103.147 level against a basket of foreign currencies, and also contributed to a 1.60% drop in the price of gold (spot) to 2020.57 dollars per ounce.

The yields on US Treasury bonds also rose sharply, with the yield on 10-year Treasury bonds rising 3.23% to 4.076% and the yield on 2-year Treasury bonds rising 2.63% to 4.247%.

The US market also experienced a sharp decline, with the S&P 500 index falling 0.52%, the Nasdaq falling 0.48%, and the Dow Jones falling 0.74%.

Oil prices fall after disappointing Chinese economic data and rising dollar

Oil prices fell on Wednesday after the release of Chinese economic growth data, the world’s second-largest crude oil consumer, which came in slightly below expectations, raising concerns about future demand increases.

China’s economy grew 5.2% year-on-year in the fourth quarter of last year, which fell short of analyst expectations and raised questions about expectations that Chinese demand would drive global oil prices growth in 2024.

At the same time, the dollar hovered near its highest level in a month on Wednesday after comments by Federal Reserve officials that reduced expectations of a significant rate cut. A rising dollar reduces demand for dollar-denominated oil for buyers who pay in other currencies.

All of these factors were enough to put pressure on oil prices, with the benchmark West Texas Intermediate (WTI) crude oil futures contract falling 61 cents, or 1.2%, to $70.79 a barrel.

Gold deepens losses for second session and hits its lowest level in a week

Gold prices fell sharply during trading on Wednesday, with the precious metal extending losses for the second consecutive session to lose more than 10 dollars and falling to a low of 2,020 dollars an ounce amid data released in China and statements by Christopher Waller, a member of the US Federal Reserve.

Gold prices now:

On the trading front, spot gold prices fell by about 0.51% to record $2,017.98 an ounce, the lowest level for spot gold since January 11.

Challenging 2024 rate cut predictions with a sole scenario for potential Fed action

Ken Rogoff, a professor of economics at Harvard University, said that the US economy will not see six rate cuts in 2024, as investors and traders expect, except in one case.

Rogoff explained that the only reason the Fed might be forced to cut in 6 meetings in 2024 is a strong economic recession.

In an interview with the Harvard economics professor and former chief economist of the International Monetary Fund with Bloomberg, he said that if the dream comes true and the US economy succeeds in creating a smooth landing without causing significant damage to the economy or causing a recession, then the expected is that 2024 will witness only 2 or 3 rate cuts at most.

Rogoff expects US interest rates to end the year at 3.5%, down from the current level of 5.5%.

Rogoff’s statements were in line with a statement by American businessman Howard Lutnick, who said that it is impossible for the Fed to cut rates to the extent that the markets expect.

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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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