The gold price remained relatively flat but well-supported in the initial part of the month, ahead of the Fed’s FOMC meeting. Consumer Prices for August came out below expectations, with the 2.5% annual pace of inflation the lowest since February 2021. Shelter costs remained the outlier, rising to 5.2% from 5.1%. The overall inflation numbers, however, provided fuel for the Fed’s rate decision.
The 50-basis-point (bp) cut surprised the majority of the market who had expected a more conservative 25bp reduction. Fed Chair Powell was quick to play down any notion that such large cuts are to become the norm, describing this as a “recalibration” of the Fed’s policy, and a further 50bps in total is likely by the end of 2024 (25bps in each of the November and December meetings).
Gold broke through $2,600 on 20 September, shortly after the Fed’s rate cut announcement, and proceeded to hit an all-time high of $2,685 on 26 September. The gold price eased in the final days of the month on the back of the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measurement of inflation. While core PCE was below consensus estimates, personal income and spending were both lower than expected, signalling a slowdown in the economy.