Title: Federal Reserve Rate Cut Decision Impact on Gold and Precious Metals Market Forecast by HSBC Analysts
Investing.com -- HSBC analysts predict a potential shift in sentiment towards a 50 basis point rate cut by the Federal Open Market Committee (FOMC) this week, rather than the expected 25 basis points (bps), which could have a bullish effect on gold and other precious metals in the short term.
Despite this, HSBC's economists maintain their outlook for a total of 25 basis point rate cuts this year. The FOMC will also update its projections for real GDP growth, unemployment, inflation, and policy rates, with minimal changes expected in GDP growth and inflation. However, there could be slight shifts in unemployment forecasts.
HSBC anticipates a decrease in the FOMC's median projection for the federal funds target range by the end of 2024 to 4.50-4.75%, in line with their forecast for rate cuts in September, November, and December. For 2025, they project a further decrease to 3.75-4.00%, aligning with their forecast of additional rate cuts over the first three quarters of next year.
If the FOMC decides to cut rates by 25 bps on Wednesday, it could benefit gold, especially given the existing market pricing for larger rate cuts and signs of excessive short USD positioning. However, analysts caution that this may lead to downward pressure on gold prices, as technical indicators like the RSI suggest the market is becoming 'overbought.'
While the FOMC decision is the primary focus, other data releases this week, including U.S. retail sales, industrial production, housing starts, jobless claims, and the leading index, as well as UK CPI and PPI, Bank of England decisions, Japan’s CPI, and UK retail sales, could also impact the gold, silver, and Platinum Group Metals (PGMs) markets.
In summary, investors should pay attention to the potential rate cut by the FOMC and its implications for the precious metals market. The decision could impact gold prices in the short term, with various economic data releases also playing a role in shaping market trends.