Gold prices touched the $2,385 mark on Friday, marking a gain of over 1.2% for the day. As expectations grow for the Federal Reserve to begin cutting interest rates as early as its meeting in September amid this rate hike, disappointing recent U.S. economic data has shaken confidence and fueled speculation of a rate cut to boost growth. Particularly weak figures in the labor market and the service sector have contributed to these expectations.
Gold prices as of 18:40 on May 5, 2024 Bulgarian time / Source: investing.com
According to the FedWatch tool by CME Group (based on 30-day federal funds futures prices), the likelihood of the Fed lowering the key interest rate by 0.25% before next month has risen from 72% earlier this week to XNUMX% on Friday.
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Federal funds futures (FEDFUNDS) are financial futures contracts based on the federal funds rate and traded on the Chicago Mercantile Exchange (CME), managed by CME Group.
The prospect of lower rates reduces the opportunity cost of holding non-yielding assets, making gold more attractive as an investment. Gold has also benefited from a weaker U.S. dollar, as expectations of lower U.S. interest rates have reduced inflows of foreign capital and strengthened major currencies.
