Futures are pointing to modest gains amid anticipation for the Federal Reserve’s September meeting minutes (FOMC) release expected at 7pm. However, ongoing economic uncertainties from a prolonged government shutdown and sticky inflation are tempering enthusiasm, potentially leading to volatility as traders digest fresh Fed insights. This FOMC statement could highlight internal divisions on the pace of rate cuts, providing clues on whether the Fed will proceed with at least two more reductions by year-end amid a slowing labour market.
Gold continues to rally, it has broken past $4,000, reflecting investor caution and demand for hedges. This also suggests a sense of unease about inflation, policy, or broader macro risks. More importantly the US Dollar is rallying, which is unusual, in general gold rallies when the dollar goes down. This tandem rally in the dollar and gold is a textbook flight-to-safety trade, and it does point to investors bracing for (or already navigating) crisis-like turbulence. Perhaps the similarities between the events leading to the bursting of the dotcom bubble in 2000 and those today are becoming more obvious.
The market smells trouble brewing, if today’s FOMC statement lean hawkish on inflation or cuts, it could accelerate the safety bid and pressure equities further. But so far markets are still near their highs, it is possible the rally in the U.S. will extend one more time.