An abundance of economic data and monthly reports has hit the press over the last 48 hours, and it all adds up to a very positive push into spring for the gold bulls say analysts.
Most significantly, the inflation data from the U.S. Bureau of Economic Analysis (BEA) offered a pleasant surprise. While a 2.3% reading was expected, the price index for gross domestic product was much cooler than thought, hitting at 1.5%. The core PCE price index remained the same, with no increase or decrease reported.
While data on the economy showed that it continued to grow, there were also some underlying causes for concern with Capital Economists experts warning that the next GDP update could show a very different picture. They say that this, coupled with the fact that inflation continues to dissipate should favour a spring rate cut.
They explain, “Although GDP growth came in hotter than expect in the fourth quarter, underlying inflation continued to slow. The upshot is that an early spring rate cut by the Fed is still the most likely outcome.”
This is nothing but bullish for the yellow metal, with any confirmation of rate cuts expected to unleash a flurry of bullish momentum and trigger a new all-time high.
The prospect of cuts is also strengthened by the economic outlook. While positive for now, the analysts say the tide is already changing and the growth outlook for Jan – March 2024 is much different. Capital Economists expect the GDP to shrink – something which again could push the Federal Reserve towards relaxing its stance sooner rather than later.
They say, “The beat relative to consensus was partly because inventories ended up being a slight positive for overall GDP growth when, after the big positive contribution in the third quarter, we were expecting a reversal last quarter. Net exports also added 0.4% points to GDP growth, as exports increased by a bigger-than-expected 6.3%. The latter was due to a slightly suspicious looking 9.5% increase in services exports. The upshot is that we still expect GDP growth to slow markedly to less than 1% annualised in the first quarter.”
Any decrease in GDP growth or other indicators of a faltering economy will further pressure the Federal Reserve to pull the lever on rate cuts. Prepare for gold prices to soar when this happens. Don’t wait for that to happen before you make your move. Buy now.
