Federal Reserve officials express inflation concerns as gold prices hover around $2,640

According to the Zhitong Finance APP, comments made by Federal Reserve officials over the weekend reinforced the view that the Federal Reserve will take a more cautious approach to interest rate cuts this year. San Francisco Fed President Mary Daly and Fed Governor Christopher Waller both emphasized the need to end the fight against inflation and achieve the Fed's 2% target. Gold prices fell 0.7% last Friday. Following these statements from Fed officials, as of the time of writing, spot gold is trading around $2,640 per ounce.

The latest dot plot released by the Federal Reserve last month showed that officials have reduced their expectations for interest rate cuts in 2025 to two times. Fed Chairman Jerome Powell also hinted that the pace of future rate cuts will be more cautious. This could be a negative factor for gold. Gold prices soared 27% in 2024, reaching a historic high, partly driven by the easing of the Fed's monetary policy.

Considering that the U.S. economy remains resilient, this may force the Fed to adopt a more cautious stance on future rate cuts, which typically benefits the dollar. Independent analyst Hiren Garasondia stated that now is the best time for gold bulls to take profits. This is because safe-haven funds are likely to flow out of gold and into the dollar, making it a very wise choice to reduce gold positions before the upward trend in gold is actually reversed.

However, looking ahead to 2025, some analysts still expect gold to shine again. Analysts noted that as investors become disappointed with declining yields, a portion of the $3.7 trillion held in money market funds will flow into gold ETFs. JP Morgan analyst Greg Shearer referred to this as "the most bullish part of the gold cycle." The analyst pointed out that another advantage of gold is that this metal has almost no use other than as a store of wealth, stating, "Gold does not carry the industrial burden of other commodities, which can be dragged down by disruptions in trade."

Additionally, State Street Bank believes that gold prices still have room to rise in 2025. The bank expects gold prices to fluctuate between $2,600 and $2,900 per ounce in 2025, with the potential to rise to $3,100 per ounce. The bank's three main reasons for being bullish on gold include: the continued enthusiasm for central bank gold purchases, which helps offset the negative impact of a strong dollar on gold prices; increasing consumption demand in China and India, the rise of local gold mutual funds and ETFs, and regulations encouraging gold holdings are driving demand; and loose monetary policy, along with fiscal policies from the Trump administration that may increase the U.S. deficit and drive inflation, which will lower the opportunity cost of buying gold relative to the dollar or U.S. Treasuries