Investor’s long-awaited update regarding the Federal Reserve’s plan to cut its benchmark interest rate (Fed funds) is finally over, and financial markets overwhelmingly welcomed what the Fed revealed today.

As investors eagerly await the conclusion of the Federal Reserve's Federal Open Market Committee (FOMC) meeting tomorrow, all eyes are on the potential impact on the price of gold. The FOMC, the monetary policymaking body of the Federal Reserve, is set to announce its decision on current monetary policy, including the possibility of interest rate cuts later this year.

Today gold futures had moderate gains of $4.50. Gold futures basis most active April contract opened at $2159.90, traded to a low of $2149.20, and is currently trading in Australia up an additional $1.90, and when added to the $4.50 gain in New York is fixed at $2165.80.

A primary purpose of holding or investing in gold is to protect one’s portfolio against high inflation. It has always been considered an inflationary hedge. Simply put, one can extrapolate that if interest rates remain elevated or spike higher it will provide bullish tailwinds supportive of higher gold pricing. 

Prices that producers charge (PPI) for their goods in the U.S. spiked higher by 0.6% last month, double the rise in January of + 0.3%. According to the Bureau of Labor Statistics, the final demand index (what consumers pay for a product) rose by 1.6% year-over-year, the largest rise since moving up 1.8% year-over-year in September 2023.

Yesterday, gold traders and investors aggressively took gold $25 lower and $37 lower during the intraday low. This was a knee-jerk reaction to the government’s release of the most current inflationary data, the CPI. Although economists polled by Reuters and Dow Jones predicted that February’s inflationary pressures would increase.

In yesterday’s article, the primary focus was on the impact that the upcoming CPI report would have on multiple financial sectors including gold and the dollar. We spoke about a single Japanese candlestick, a “doji” which occurred yesterday in the daily Japanese candlestick chart of gold futures, and on Friday in the dollar index.

Gold traders and investors are acutely aware of the dynamic impact that tomorrow’s CPI report will have on multiple financial sectors, including gold prices. Gold futures basis, the most active April contract traded to a higher low, and a lower high than Friday.

Chairman Powell along with other Fed officials has been conveying a unified narrative, that inflation is “not far” from where it needs to be for the central bank to pivot from a restrictive policy to its first rate cut. Today’s jobs report reinforces and strengthens the likelihood of the first rate cut by the Federal Reserve by June of this year. 

Gold prices continue to advance trading to a new record close today with one notable exception: gains over the last two days have been primarily driven by dollar weakness rather than buying.