For the first time since March 2022 the Federal Reserve spoke of an upcoming pivot from its former highly restrictive monetary policy based upon aggressive rate hikes, to an accommodating stance based upon rate cuts. Federal Reserve officials have been open and transparent in communicating that the time to reverse its course and lower its benchmark rates is approaching.

Gold futures basis, the most active April contract (GC J24) gained $9.10 or 0.45% as of 4:40 PM ET. Dollar weakness contributed approximately half of today’s gains, with the dollar index (USDX) declining by 0.24%, with the remaining 0.20% directly attributable to investors bidding the precious yellow metal higher.

Economically speaking, we live in a very unusual time in the way economists interpret upbeat economic data. Reports that reveal solid economic advancements in the past have been interpreted in a positive light as suggest economic growth and prosperity. 

The US Department of Labor released its weekly jobless claims report at 8:30 AM ET, revealing that jobless claims rose to a two-month high. Jobless claims rose by 9000 resulting in a total of 224,000 individuals that applied for unemployment benefits. Continuing claims increased by 70,000 to 1.898 million.

Today the Federal Reserve concluded its first open market committee meeting of the year. Three important takeaways were revealed in both the written Fed statement and comments made by Chairman Powell at the following press conference.

First, as anticipated the Federal Reserve decided to maintain its target range for the federal funds rate between 5 ¼% and 5 ½%.

While it is a widely accepted assumption that the Federal Reserve has completed its rate hike cycle, the Fed has been very close to the chest regarding when it will initiate its first rate cut. It is almost a certainty that it will not occur tomorrow. According to the CME’s FedWatch tool, the probability of the Fed cutting rates tomorrow has a 2.3% of occurring.

Today’s report by the Commerce Department came in just under the expectations of economists polled by Dow Jones. Economists were forecasting that the PCE for December would come in at 3% year-over-year. Today’s report revealed that inflation is cooling with a reading of 2.9% yearly a decline of 0.3% when compared to November’s yearly inflation level which was at 3.2%. 

Today, the Commerce Department released the fourth quarter GDP report. The report revealed that the United States economy has grown at a rate of 3.3% during Q4 last year. Economic growth for the fourth quarter last year came in well above expectations by economists polled by Dow Jones. Economists were expecting that the fourth quarter GDP would only show an economic growth of 2%.

Both the dollar and gold dropped today as investors and traders wait for two important economic reports later this week. Tomorrow’s first reading of U.S. GDP for the final quarter (Q4) of last year, and Friday's PCE report for December. 

As of 4:30 PM ET, gold futures basis the most active February contract is currently up $7.30 (0.36%) and fixed at $2030.40. Although gold traded to a higher high than yesterday, gold has not fully regained the ground lost during Monday’s price decline. That being said, gold continues to have a bullish bias and strong support at $2015, which is based on last week’s lows.