NEWS

Looking back at the macro economy and precious metals market in the first quarter of 2024, we see that:

The dot plot shows that the median forecast is still three rate cuts, and the neutral real rate (r-star) is slightly higher than expected.

The Federal Reserve left the target range for the federal funds rate unchanged at 5.25% to 5.5% for the fifth consecutive meeting. The latest released dot plot shows that the Federal Reserve maintains its expectation of three interest rate cuts this year and tends to slow down the pace of balance sheet contraction. Compared to last December, four members narrowed their expectations from 100 basis points to 75 basis points, and the median forecast was changed from four cuts last year to three.

Policymakers estimated the neutral real interest rate (r-star) to be slightly higher than previously thought. In the new summary of economic forecasts, the median forecast for the long-run federal funds rate edged up to 2.6 percent from 2.5 percent in December. Near-term forecasts for economic growth have been modestly revised upward, but the increases in forecasts for the long-run federal funds rate and r-star do not necessarily reflect optimism about real growth prospects and labor productivity. Rather, they may be the result of upward pressure on interest rates from persistent fiscal imbalances.

The price of gold hit a record high, and the fluctuation of the price difference between home and abroad increased.

In the context of the Federal Reserve's policy shift, the rising price of gold is also driven by supply and demand factors. Global gold demand in 2023 set a new record, 8% higher than in 2022. A large part of the change in demand for gold has been purchases by central banks. Bloomberg Industry Research's Gold Supply and Demand Monitor shows that total demand for gold has been at a nearly three-year high for four consecutive quarters. Central bank purchases in 2023 are almost the same as in 2022, with large central bank purchases coupled with the resilience of gold consumption showing high demand in the near term. Looking at the price performance of secondary market ETFs, global gold ETFs fell for the third year in a row, though ETF outflows are expected to be curbed by the start of the rate cut cycle and heightened political and geopolitical tensions.