As of 5:30 PM EDT, the price of gold for future delivery, specifically based on the most actively traded June 2024 contract, has dropped by $2.10, which is about -0.09%, settling at $2347.50. If it weren’t for the dollar weakening, gold would have fallen even more today. The dollar’s value has decreased by -0.26%, bringing the dollar index to 105.525. Gold tends to move opposite to the dollar, so if the dollar had stayed stable, gold would have likely lost more value.
The Federal Reserve is set to start its two-day meeting of the Federal Open Market Committee (FOMC) on Tuesday, wrapping up on Wednesday. It’s widely expected that they’ll keep the benchmark interest rate, known as the fed funds rate, as it is.
According to the CME’s FedWatch tool, there’s a very high probability, about 94.6%, that the Fed will stick with the current rates. There’s only a small chance, around 5.4%, that they might lower rates by a quarter of a percent, bringing the benchmark rate to somewhere between 5% and 5.25%.
After this week’s FOMC meeting, the Federal Reserve will issue a statement, and Chairman Jerome Powell will hold a press conference.
While futures markets are pretty sure that interest rates won’t change, people are keen to see what the Fed will do about managing its balance sheet, which is expected to get a lot of attention.
Rahul Kumar, an author, pointed out that the Fed’s influence on monetary policy isn’t just through interest rates. They also affect things like the repo market and the size of their balance sheet. Quantitative easing (QE) is when the Fed buys lots of assets, putting money into the financial system. Quantitative tightening (QT) is when they reduce the balance sheet by letting assets mature without reinvesting. Since June 2022, the Fed has been shrinking its balance sheet. Powell’s hints at slowing this process down suggest a possible change in strategy, with an official announcement expected in May and a decrease in the monthly pace of balance sheet reduction.
The Fed has been steadily reducing assets from its balance sheet since it peaked in 2022, and decisions about this are separate from decisions about interest rates.
It looks like most investors will wait for guidance from the Fed before making big moves in their investment portfolios, including decisions about gold and U.S. stocks.
