Gold gains as the Federal Reserve starts June’s FOMC meeting

Gold registered some gains on Tuesday since global stock indexes paused recent rallies. On the other hand, a weakened US dollar is supporting gold bulls. August gold futures increased by $15.90 an ounce to $1,720.70. 

US stock indexes are getting some pull-backs from recent substantial benefits. The investor and trader sentiment remains positive. According to the National Federation of Independent Business, the small business optimism index increased last month to 94.4 from 90.9 in April.

The US government stated that the country’s economy officially entered recession in February. On Monday, the Fed expanded its landing program to the country’s businesses. 

The Federal Reserve is likely to keep interest rates at zero

Today, the members of the Federal Reserve will start June’s Federal Open Market Committee meeting. They will focus on the US’s current monetary policy. This session will end at 18:00 GMT.

Even though anything is possible, some forecast that they will extend the Federal Reserve’s fund rate to near zero. Also, they believe their quantitative easing strategy will continue. Overall, they are expected to offer whatever is needed to maintain the advance of the economy from the economic low the coronavirus pandemic has caused. 

Analysts expect that the Fed will keep current interest rates at zero to 25%. The rates will remain low until the country has successfully weathered the financial turbulence, unemployment, and price instability the coronavirus outbreak has created. 

Some analysts have predicted that the Fed will add more mortgage-backed securities and treasuries to their balance sheet. They will end up spending another $1.3 million for them. 

It is almost guaranteed that the Fed will stay on its current course. Still, there are some questions that need answering. Hopefully, today’s statement will shed light on these matters during the press conference. 

The global GDP will shrink by 5.2% in 2020

On the other hand, Eurozone’s economy contracted by 3.6 in the first quarter of 2020. Forecasters expect that the second quarter could be even worse. 

According to the World Bank Forecast, the global GDP will shrink by 5.2% this year. Leading economies in the world will see a 7% contraction, while the Eurozone will be leading them by a 9.1 % slump. Analysts expect the US GDP to decline by 6.1%; India’s GDP is likely to drop by 3.2% and China’s by 1%.

The World Bank said that, since 1870, this is the first recession that was triggered solely by a pandemic. Given the uncertainty, the bank expects further downgrades. However, 2021 will see global economic growth of 4.2%.