Fed Policy and Inflation Expectations in Focus
Easing inflation data has strengthened expectations of a dovish Federal Reserve stance, which typically supports gold. The Consumer Price Index (CPI) posted a modest 0.2% monthly increase, while core inflation came in below forecasts.
Federal Reserve Governor Christopher Waller added to this sentiment by highlighting the possibility of multiple rate cuts if inflation continues to cool. Futures markets are pricing in nearly even odds of two rate cuts before the end of the year. These expectations weaken the dollar and reduce the opportunity cost of holding gold, boosting its attractiveness to global investors.
Impact of Trump’s Policies on Inflation and Gold
Trump’s proposed fiscal and trade policies, including tariffs on imports, are expected to create inflationary pressures. Tariffs could drive up consumer prices, complicating the Federal Reserve’s decisions on interest rates. Trump’s agenda, which features tax cuts and infrastructure spending, also raises concerns about increased fiscal deficits and heightened inflation. These factors enhance gold’s role as an inflation hedge during periods of economic uncertainty.