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Gold futures yield gains as optimism regarding rate cuts by investors grows

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As of 4:50 PM EDT, gold futures basis most active April contract (GCJ24) is currently up $5.90 or 0.27% and fixed at $2177. 

This optimism took the April futures contract of gold to an intraday high of $2200.60. The current volume in the April contract is 197.92 3K. The April contract will come up for the first delivery day notice tomorrow. The next most active futures contract will be the June contract with (GCM24). 

June gold is currently fixed at $2203.50, with current volume at 215,474K. Volume is greater in the June contract month than the April contract month, in that any traders that had active trades in April gold have either already rolled over their position into the June contract or will do so within the next 24 hours.

Gains in gold futures have been for a large part based upon optimism by market participants, who believe there is a high probability that the Federal Reserve’s intention to cut rates has strengthened. This is partially due to the dovish tone of Chairman Powell and the revised Summary of Economic Projections, which includes the dot plot, that was released at the last FOMC meeting.

Even though the Federal Reserve addressed the unexpected uptick in inflationary pressures, statements made suggest they are hoping that this is an anomaly not the beginning of a trend. Because of that assumption, the Federal Reserve expressed that they are still moving forward with anticipated rate cuts, which will probably begin in June or July. More importantly, they have penciled in an average of three rate cuts this year, with each cut reducing the Fed funds rate by ¼%.

Market participants will now begin focusing on the next inflation report released by the government, which will occur on Friday, March 29. This will be interested in that most financial markets will either have shortened trading hours or be completely closed from Friday, March 29 to Sunday, March 31. These closes are in honor of “Good Friday” the holiday that occurs just before Easter Sunday. 

This means that regardless of the numbers that are released on Friday for the U.S. Core Personal Consumption Expenditure Price Index (Core PCE), investors and traders will not be able to place trades in the financial markets for the long three-day holiday weekend. The CME will close metals trading on Thursday, March 28th, at 15:05.

Wishing you as always good trading,

Gary S. Wagner - Executive Producer