Gold futures basis, the most active April contract 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 declining by 0.24%, with the remaining 0.20% directly attributable to investors bidding the precious yellow metal higher. Exchange volume was rather subdued today, with daily volume falling well below the monthly average.
The probability of a rate cut in March is only 19.5% according to the CME’s FedWatch tool. The probability increases dramaticallyin May, with a high likelihood of the Fed initiating its first rate cut. Currently, there is a 53.2% probability that the Fed will implement a ¼% rate cut and a 10.8% probability that the Fed will be more aggressive in cutting rates by a ½%. This leaves only a 36.1% probability that the Fed will maintain its current level of 5 ¼% to 5 ½% in May.
When questioned why the Federal Reserve has not already cut rates, Chairman Powell addressed multiple factors such as the strong economy with growth at a solid pace, a labor market with only 3.7% employment which the chairman believes that they can have the latitude to wait and reduce rates carefully and slowly.
The chairman expressed the danger of moving too soon and expressed that the most prudent thing to do is to give it some time and “see that the data continues to confirm that inflation is moving down to 2% in a sustainable way”.