Gold Scales 2-week High as Fed Signals Likely Sept Rate Cut

Gold bullion displayed in a store in the German city of Pforzheim (dpa)
Gold bullion displayed in a store in the German city of Pforzheim (dpa)
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Gold Scales 2-week High as Fed Signals Likely Sept Rate Cut

Gold bullion displayed in a store in the German city of Pforzheim (dpa)
Gold bullion displayed in a store in the German city of Pforzheim (dpa)

Gold prices hit a two-week high on Thursday as US Federal Reserve Chair Jerome Powell opened the door to cutting interest rates as early as September.
Spot gold was little changed at $2,445.39 per ounce, as of 0650 GMT, after hitting its highest since July 18 earlier in the session. Prices were just $38 shy of the record high of $2,483.60 scaled on July 17.
US gold futures firmed 0.7% to $2,490.10, Reuters said.
"The trend for gold remains bullish and prices should hit $2,500 this year as the Fed lowers interest rates," said Peter Fung, head of dealing at Wing Fung Precious Metals.
Fed Chair Jerome Powell said on Wednesday rates could be cut as soon as September if the US economy follows its expected path, putting the central bank near the end of a more than two-year battle against inflation.
Zero-yield gold tends to thrive in a low interest rate environment.
"Gold bugs may want to warrant some caution above $2,500, given gold's reluctance to hold onto gains around these levels," City Index senior analyst Matt Simpson said.
Market focus shifts to Friday's US payrolls report.
"If the data comes in much hotter than expected, that could dent gold as we head towards the weekend," Simpson added.
Elsewhere, Hamas leader Ismail Haniyeh was assassinated in the Iranian capital Tehran early on Wednesday morning, an attack that drew threats of revenge on Israel and fueled further concerns that the conflict in Gaza was turning into a wider Middle East war.
Geopolitics is increasingly more supportive for gold in the medium and long term, Nicky Shiels, head of metals strategy at MKS PAMP SA said in a note.
Spot silver fell 0.4% to $28.92, platinum lost 0.4% to $972.35 and palladium eased 0.2% at $923.60.
Key metals consumer China's manufacturing activity in July shrank for the first time in nine months, a private sector survey showed.



US Tariffs Could Slow China's Growth to 4.5% in 2025

People walk past a billboard which reads I love Beijing, Happy New Year at 798 art district, ahead of the upcoming Lunar New Year, marking the Year of the Snake, in Beijing on January 14, 2025. (Photo by JADE GAO / AFP)
People walk past a billboard which reads I love Beijing, Happy New Year at 798 art district, ahead of the upcoming Lunar New Year, marking the Year of the Snake, in Beijing on January 14, 2025. (Photo by JADE GAO / AFP)
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US Tariffs Could Slow China's Growth to 4.5% in 2025

People walk past a billboard which reads I love Beijing, Happy New Year at 798 art district, ahead of the upcoming Lunar New Year, marking the Year of the Snake, in Beijing on January 14, 2025. (Photo by JADE GAO / AFP)
People walk past a billboard which reads I love Beijing, Happy New Year at 798 art district, ahead of the upcoming Lunar New Year, marking the Year of the Snake, in Beijing on January 14, 2025. (Photo by JADE GAO / AFP)

China's economic growth is likely to slow to 4.5% in 2025 and cool further to 4.2% in 2026, a Reuters poll showed, with policymakers poised to roll out fresh stimulus measures to soften the blow from impending US tariff hikes.

Gross domestic product (GDP) likely grew 4.9% in 2024 - largely meeting the government's annual growth target of around 5%, helped by stimulus measures and strong exports, according to the median forecasts of 64 economists polled by Reuters.

But the world's second-largest economy faces heightened trade tensions with the United States as President-elect Donald Trump, who has proposed hefty tariffs on Chinese goods, is set to return to the White House next week.

“Potential US tariff hikes are the biggest headwind for China's growth this year, and could affect exports, corporate capex and household consumption,” analysts at UBS said in a note.

“We (also) foresee property activity continuing to fall in 2025, though with a smaller drag on growth.”

Growth likely improved to 5.0% in the fourth quarter from a year earlier, quickening from the third-quarter's 4.6% pace as a flurry of support measures began to kick in, the poll showed.

On a quarterly basis, the economy is forecast to grow 1.6% in the fourth quarter, compared with 0.9% in July-September, the poll showed.

The government is due to release fourth-quarter and full-year GDP data, along with December activity data, on Friday.

China's economy has struggled for traction since a post-pandemic rebound quickly fizzled out, with a protracted property crisis, weak demand and high local government debt levels weighing heavily on activity, souring both business and consumer confidence.

Policymakers have unveiled a blitz of stimulus measures since September, including cuts in interest rates and banks' reserve requirements ratios (RRR) and a 10 trillion yuan ($1.36 trillion) municipal debt package.

They have also expanded a trade-in scheme for consumer goods such as appliances and autos, helping to revive retail sales.

Analysts expect more stimulus to be rolled out this year, but say the scope and size of China's moves may depend on how quickly and aggressively Trump implements tariffs or other punitive measures.

More stimulus on the cards

At an agenda-setting meeting in December, Chinese leaders pledged to increase the budget deficit, issue more debt and loosen monetary policy to support economic growth in 2025.

Leaders have agreed to maintain an annual growth target of around 5% for this year, backed by a record high budget deficit ratio of 4% and 3 trillion yuan in special treasury bonds, Reuters has reported, citing sources.

The government is expected to unveil growth targets and stimulus plans during the annual parliament meeting in March.

Faced with mounting economic risks and deflationary pressures, top leaders in December ditched their 14-year-old “prudent” monetary policy stance for a “moderately loose” posture.

China's central bank is expected to deploy its most aggressive monetary tactics in a decade this year as it tries to revive the economy, but in doing so it risks quickly exhausting its firepower. It has already had to repeatedly shore up its defense of the yuan currency as downward pressure pushes it to 16-month lows.

Analysts polled by Reuters expected the central bank to cut the seven-day reverse repo rate, its key policy rate, by 10 basis points in the first quarter, leading to a same cut in the one-year loan prime rate (LPR) - the benchmark lending rate.

The PBOC may also cut the weighted average reserve requirement ratio (RRR) for banks by at least 25 basis points in the first quarter, the poll showed, after two cuts in 2024.

Consumer inflation will likely pick up to 0.8% in 2025 from 0.2% in 2024, and rise further to 1.4% in 2026, the poll showed.