HSBC: Federal Reserve's Bowman's warning may "restrain" gold prices!

Gold has been boosted by multiple factors recently. Expectations of a rate cut by the Federal Reserve have weighed on the US dollar and lifted the price of gold. Additionally, Israeli strikes in southern Lebanon have heightened tensions in the Middle East, leading to some safe-haven demand for gold. Furthermore, the strong policy package announced by the People's Bank of China has also provided support for gold. Comments from Federal Reserve officials this week, as well as the release of the preferred PCE inflation gauge on Friday, may provide more clues on the future path of borrowing costs. Citigroup analysts predict that after a significant 50 basis point rate cut last week, the Fed may cut rates by a total of 125 basis points this year. Meanwhile, Goldman Sachs expects 25 basis point cuts at every meeting from November until June 2025. However, in a report to clients, analysts at HSBC pointed out that recent comments by Fed Governor Bowman against significant rate cuts "may dampen" gold's recent strength. On Tuesday, Bowman defended her vote against a large rate cut, noting that key inflation indicators remain "alarmingly high" above the levels announced by the Fed. Her stance contrasts with the views of several Fed officials earlier this week, who believed that a 50 basis point rate cut was necessary due to the excessive pressure high rates were putting on the economy at a time when inflation seemed to be easing and labor demand pressures were increasing. HSBC analysts wrote: "The scenario outlined by Ms. Bowman, while entirely possible and negative for gold, is clearly not one that gold investors, who have shown confidence in faster rate cuts by hitting record highs, are adopting." Wall Street is more optimistic about the US economic outlook than Bowman. Alastair Borthwick, Chief Financial Officer of Bank of America, said that in the days following the Fed's first rate cut in four years, the Fed appears to be winning the US battle against inflation. Borthwick said at a meeting on Wednesday: "It's important for the Fed to win the battle against inflation for the economy. It looks like they are winning this battle." These comments echo Powell's view that the high inflation phase in the US has ended. Borthwick said: "We are now back to what looks more like a low-growth, low-inflation, and possibly reasonable interest rate environment, which should be a pretty good environment for the US banking industry." He also praised the Fed's commitment to water down the controversial "Basel endgame" proposal. The revised plan will raise capital requirements for large banks by 9%, compared to the previously proposed increase of 19%