As of 1 February 2024, The US Federal Reserve have unanimously voted to keep US interest rates unchanged for the fourth meeting in a row. This was broadly anticipated by the market as a response to stubborn inflation figures – headline Consumer Price Index (CPI) inflation actually rose to 3.4% in December, counter to the Fed’s ambition to bring inflation down to 2%.
Gold dropped from a peak above $2,055 to almost $2,030 as markets digested comments from Fed Chair Jerome Powell that he doesn’t expect to see rate cuts at the next Fed meeting in March either. However, the gold price soon rebounded above $2,040 as analysts, investors and the financial media began speculating about large rate cuts sometime later this year.
In the UK, the Bank of England’s Monetary Policy Committee also voted to keep interest rates unchanged at 5.25%, and UK CPI inflation is currently at 4% against the Bank’s target of 2%. Some public figures, including politician Sir David Davis and former government advisor Ben Ramanasuskas, had called for the Bank to cut interest rates to avoid a potential recession.
The anticipation of interest rate cuts could help support the gold price as lower interest rates help reduce the ‘opportunity cost’ of holding gold, making it a potentially more appealing safe haven for those seeking to protect their investment portfolios from the impact of rising geopolitical tensions or economic turmoil. Learn more here.
If you’d like to understand more about the expectations for 2024 interest rates, view our latest article here.
Notes
The contents of this article are accurate at the time of publishing, are for general information purposes only, and do not constitute investment, legal, tax, or any other advice. Before making any investment or financial decision, you may wish to seek advice from your financial, legal, tax and/or accounting advisers.
