Gold price trends (XAU/USD) is showing a modest increase of about 0.2% in the $2,350 range on Thursday. This uptick follows the European Central Bank’s (ECB) decision to cut interest rates by 0.25% during its June policy meeting. This rate cut is beneficial for gold, as it lowers the opportunity cost of holding this non-yielding asset. Moreover, gold is further supported by expectations that the Federal Reserve (Fed) might implement rate cuts as soon as September, despite the recent release of unexpectedly high US Institute for Supply Management’s (ISM) Services PMI data.
Gold Surges as Markets Brace for Decreased Interest Rates
Gold price trends are climbing as investors anticipate a potential interest rate cut by the Federal Reserve. Currently, there is a 69% probability that the Fed will lower rates by September, based on the CME FedWatch tool. This expectation reduces the opportunity cost of holding gold, enhancing its appeal as a safe-haven asset. Globally, the trend towards lower interest rates is gaining momentum. The Bank of Canada (BoC) recently reduced its overnight rate from 5.00% to 4.75%, while the ECB cut its main refinancing rate by 0.25% to 4.25%. Additionally, there is growing speculation that the Swiss National Bank (SNB) might also lower its key rate, with a decision anticipated on June 20 following recent lower inflation data in Switzerland.
Conclusion
The recent rate cuts by the ECB and other central banks, along with expectations of further reductions, are supporting gold prices. As markets prepare for potential rate cuts by the Fed and other global institutions, gold remains an attractive option for investors seeking to hedge against uncertainty.
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