Banyan Gold Corp. (TSXV: BYN, OTCQB: BYAGF)
The New Yukon Gold Rush
The market’s expectations regarding the Federal Reserve’s policies are constantly changing, which has a dual impact on the gold market. On one hand, expectations of easing policies support gold’s safe-haven demand; on the other hand, rising U.S. dollar and Treasury yields exert pressure on gold prices.
On Friday (August 30, local time), after the latest U.S. inflation data met expectations, gold prices softened but remained above the $2,500 level, with the possibility of a Fed rate cut in September looming.
As of 11:20 AM Eastern Time, spot gold fell by 0.6% to $2,506.59 per ounce, while New York gold futures dropped by 0.9% to $2,538.30 per ounce.
Despite this pullback, gold prices are expected to rise by 3% this month, having previously reached a historic high of $2,531.60 just a week ago.
Earlier that day, data from the U.S. Department of Commerce indicated that the Personal Consumption Expenditures (PCE) price index rose by 0.2% in July, aligning with economists’ forecasts.
Alex Ebkarian, COO of Allegiance Gold, stated in a report, “The PCE data confirms that inflation is no longer the Fed’s primary concern; they have shifted their focus to employment, further validating the likelihood of a rate cut in September. Next week is expected to be more volatile, and we will be watching for more unemployment data.”
According to the CME Group’s FedWatch tool, traders have slightly raised their expectations for the Federal Reserve to cut interest rates by 25 basis points next month to 69%, while expectations for a 50 basis point cut have decreased to 31% following the inflation report.
Daniel Ghali, commodity strategist at TD Securities, stated that systematic trend-followers are currently the biggest bulls. Holdings in Shanghai are close to historical highs, despite a relatively weak demand for physical gold in China and subdued inflows into Chinese gold ETFs. Given that positions appear to be at extreme levels, the short-term downside risk for gold prices is increasing.
Han Tan, Chief Market Analyst at Exinity, emphasized that the current trend in the gold market is highly influenced by Federal Reserve policies. Despite gold prices being near historical highs, the appetite for bulls is waning. If non-farm payroll data comes in strong, the market may ease expectations for a 50 basis point cut in September, which could push gold prices below $2,500.
