Daily Newsletter 3/20/25

Good morning.

FOMC Meeting

The Federal Open Market Committee (FOMC) held its meeting on March 18-19, 2025, with several key outcomes and projections:

Interest Rates and Policy Stance

• The FOMC kept the federal funds rate target range unchanged at 4.25-4.50%.

• The committee signaled increased economic uncertainty, stating "Uncertainty around the economic outlook has increased".

Economic Projections

• GDP growth forecast for 2025 was lowered to 1.7% from the previous 2.1% estimate in December.

• Unemployment rate projection for the end of 2025 was raised to 4.4% from 4.3.

• Core PCE inflation estimate for 2025 was revised upward to 2.8% from 2.5%.

Balance Sheet and Securities Holdings

• Beginning in April 2025, the FOMC will slow the pace of decline in its securities holdings:

  • Monthly redemption cap on Treasury securities reduced from $25 billion to $5 billion.

  • $35 billion cap maintained on agency debt and mortgage-backed securities.

Future Outlook

• The median projection still indicates two potential rate cuts in 2025, despite a more hawkish shift in some members' views.

• The committee remains vigilant to risks associated with both aspects of its dual mandate: maximum employment and price stability.

Market Reaction

• Stock markets responded positively to the Fed's decision and outlook, with the Dow climbing after the announcement.

The FOMC's decision reflects a cautious approach to monetary policy amid heightened economic uncertainty, balancing concerns about inflation and economic growth while maintaining flexibility for future adjustments.

Bank of Japan (BoJ) Meeting

At its meeting on March 18-19, 2025, the Bank of Japan (BoJ) decided to maintain its key policy interest rate at 0.5%, following a unanimous vote by its Policy Board. This decision reflects the BoJ's cautious approach to monetary policy amid ongoing economic uncertainties. Below are the key highlights:

Monetary Policy Decision

• The BoJ kept the uncollateralized overnight call rate at 0.5%, the highest level in 17 years, following a 25 basis point hike in January 2025.

• The central bank emphasized its commitment to gradually normalizing monetary policy but showed no urgency for further rate hikes.

Economic Assessment

• Japan's economy has been recovering moderately, though some weaknesses persist:

  • Exports and industrial production remain flat.

  • Private consumption is improving modestly despite rising living costs.

  • Housing investment has been weak, while public investment is stable.

• Inflation remains elevated, with the year-on-year increase in the consumer price index (CPI) (excluding fresh food) at 3.0–3.5%, above the BoJ's 2% target.

Key Concerns

• External Risks: Governor Kazuo Ueda highlighted uncertainties related to U.S. trade policies and rising tariffs, which could impact Japan’s recovery and financial markets.

• Cost of Living: Rising prices for essentials like food and energy have weighed on household consumption.

• Wage Growth: The BoJ is relying on wage increases to sustain a "virtuous cycle" between wages and inflation.

Outlook

• Analysts expect the BoJ to raise rates gradually later in 2025, potentially reaching 0.75% by July, depending on economic conditions and inflation trends.

• The BoJ plans to monitor global economic developments and domestic consumption before making further adjustments.

This decision underscores the BoJ's cautious stance as it balances inflation control with supporting economic growth amid domestic and international challenges.

GOLD

Gold prices have recently been fluctuating near record highs, influenced by strong safe-haven demand and geopolitical tensions:

• Spot Prices: As of recent updates, gold is trading around $3,030–$3,045 per ounce, with minor daily fluctuations depending on the source.

• Year-to-Date Performance: Gold has gained over 15% since the start of 2025, driven by inflation concerns, central bank purchases, and global uncertainties.

• Price Per Gram/Kilogram: The price per gram is approximately $97.50, while per kilogram it is near $97,500.

These trends highlight gold's role as a key safe-haven asset amid economic and political uncertainties.

How to invest in gold?

There are several ways to invest in gold, each with its own advantages and considerations:

Physical Gold

1. Gold Bullion: You can purchase gold bars or coins from government mints, private mints, precious metals dealers, or jewelers. This option provides direct exposure to gold that you physically possess or store in a depository.

2. Gold IRAs: You can own physical gold through a gold IRA, which allows you to hold gold in a retirement account.

Financial Investments

1. Gold ETFs and Mutual Funds: These offer exposure to gold without physical ownership. They provide liquidity and can be purchased through a brokerage account. Gold ETFs often have lower expense ratios and offer intraday trading on national exchanges.

2. Gold Mining Stocks: You can invest in shares of gold mining companies. The profitability of these companies may increase with rising gold prices, potentially reflecting in their stock prices.

3. Gold Futures and Options: These derivatives allow you to control a larger amount of gold with a smaller initial investment, but they come with higher risk due to leverage.

4. Gold Streaming Companies: These companies provide financing to gold miners in exchange for the right to purchase a portion of their future gold production at a predetermined price.

Considerations

• Physical gold requires secure storage and may incur high transaction fees or dealer markups.

• Gold ETFs and mutual funds may have expense ratios and not always be fully backed by physical gold.

• Gold mining stocks are subject to company-specific risks beyond just gold prices.

• Futures and options involve higher risk and potential for losses exceeding the initial investment.

When choosing a gold investment method, consider factors such as liquidity needs, risk tolerance, and investment goals. It's advisable to research thoroughly and possibly consult with a financial advisor before making any investment decisions.

Here are some of the top-performing and recommended gold ETFs to follow in 2025:

Best Performing Gold ETFs (2025)

1. Franklin Responsibly Sourced Gold ETF (FGDL)