Fed Policy Outlook and Beige Book Fuel Rate Cut Expectations

Markets are increasingly pricing in a June rate cut, with the CME FedWatch Tool showing odds above 60% for at least one reduction this summer. The Federal Reserve’s Beige Book, released Wednesday, pointed to slowing labor market momentum and tepid consumer spending.

“Growth is modest and uneven,” the report noted, signaling that conditions could soon warrant a policy response.

Non-yielding assets like gold benefit from a lower interest rate environment. With traders anticipating as many as three cuts in 2025, gold’s resilience reflects a hedge against weakening macroeconomic data and declining yields.

The U.S. Dollar Index slipped from recent highs as Treasury Secretary Scott Bessent dismissed reports of unilateral tariff reductions, underscoring continued uncertainty around the U.S.-China trade dialogue. A weaker dollar typically boosts demand for dollar-denominated assets, lending support to bullion.

A preliminary reading of S&P Global’s April PMI showed mixed results: manufacturing ticked higher, while services slowed, adding to investor caution. Looking ahead, Jobless Claims and Durable Goods Orders will provide the next major data points.

While gold remains range-bound, its ability to hold above $3,300 amid improving sentiment suggests persistent underlying demand driven by macro and policy uncertainty.