The Bank of Canada
Starting off with the Bank of Canada, which many expect to see a 25 bps rate cut tonight, from 2.75% to 2.50%, and that could be the result of reaching the desired inflation level while seeing some sluggishness in the labor market conditions.
As per the purchasing managers’ index report, they cited seeing some marginal increase in the input price due to higher supplier charges from tariff uncertainty, along with the rising employment costs. Yet the overall inflation continues to slip below 2% while the unemployment rate has still risen noticeably.
The Federal Reserve
The same fate falls on the Federal Reserve with a 25 bps rate cut projection, while some still expect for a 50 bps cut. But the real question is, who will vote for which? The dot plot, the future guidance, and how the Federal Reserve Chair Jerome Powell will lean more?
Key note here is that Stephen Miran will also join this FED decision, which is most likely to stand by Trump’s desired rate of 50 bps, while Bowman and Waller will also likely follow the same.
So if 25 bps come as expected, and the FED powell sticks to the same communication as in Jackson Hole—weak labor market concern—then this will signal a dovish sign and will likely support the gold price.
However, if he believes that the labor market is still solid, given how the recent jobless claims were fraudulent in Texas, while inflation concerns are still on their minds, and that could lead to a more cautious approach, the gold pullback scenario will come into play.
In the other case, where 50 bps come unexpectedly, then this will surprise the market, and gold prices will most likely rise as easing weakens the USD.
For now, the gold price decline could potentially result from profit-taking while some await tonight’s market reaction.
