Last week, gold prices experienced a significant pullback after reaching a historic high of $2,780, primarily due to the rise in the US core PCE price index. This inflation indicator, favored by the Federal Reserve, signaled a potential slowing in the Fed's rate cut pace. Data showed that the core PCE price index's annual rate reached 2.7% in September, with the monthly rate rising to 0.3%, marking the highest monthly increase since April. This data heightened market expectations for tighter future Fed policies, temporarily suppressing the safe-haven demand for gold.
However, this week the market's focus quickly shifted to the US election and the upcoming Fed policy meeting. With the presidential election imminent, the latest polls indicate a slight Democratic advantage, and the final election result is expected on Tuesday. In this context, election uncertainties and political risks keep investors cautious, especially considering that different party policies will have profound impacts on future economic and monetary policies. For instance, a Democratic government generally favors extensive fiscal stimulus and social welfare spending, potentially raising inflation expectations, which usually benefits gold.
Meanwhile, the latest Fed policy meeting is set for this Friday, with market expectations of a possible 25 basis point rate cut. Nonetheless, attention is also on the Fed's stance over the coming months, particularly regarding whether further rate cuts will occur by year-end to address slowing economic growth. Signs of the US economic slowdown have gradually appeared, with October's non-farm payrolls significantly below expectations, adding only 12,000 jobs. The market widely believes such data may not affect the Fed's current policy decisions, but economic data in the coming months will be crucial.
J.P. Morgan suggests that in the short term, gold prices may continue to fluctuate, but they are likely to rise in the long term. The bank believes that gold prices will benefit from monetary easing policies by major central banks and ongoing gold purchasing demand from central banks globally. Additionally, the trend of global currency devaluation and central banks' preference for gold reserves are factors supporting gold prices. Particularly in the context of the Fed's rate-cutting cycle, lower interest rates typically enhance the appeal of non-yielding gold, thereby supporting its price.
This week's gold movements may be influenced by the election and FOMC meeting outcomes. Investors faced with US political and policy changes might consider gold as a safe-haven choice. Despite potential short-term price fluctuations, analysts generally agree that any pullback could provide long-term buying opportunities, especially amid expectations of continued US monetary policy easing.
