Gold Bulls Eye $2,600 Ahead of Highly Anticipated Fed Meeting

 

Gold Sets New All-Time High, Eyes $2,600/oz Ahead of Fed Rate Cut

(Bullion News Network) – Gold’s spot price reached a new all-time high on Thursday as markets looked ahead to an interest rate cut, which is virtually guaranteed to happen when the Federal Reserve meets next week. Prices climbed again this morning, driving gold past $2,580 and setting yet another highest gold price ever. Gold gained $25 since market open, putting the precious metal within $20 of soaring past another key resistance at $2,600/oz. 

The price run comes less than a week before the Federal Reserve’s Federal Open Market Committee, responsible for setting interest rates, is set to meet. This meeting will happen on the 17-18th, and Fed Chair Jerome Powell has already confirmed that the “time has come” for interest rates to come down. Gold has traditionally performed well during periods of low interest rates, and speculation surrounding if – and when – the Fed will finally cut rates has driven much of the metal’s historic price action in 2024. 

In the weeks leading up to yesterday’s big price jump, market bets on rate cuts shifted from when/if to how much. A 25 basis point cut was fully priced in as early as last week, given Fed Chair Powell’s late-August signals and good news concerning inflation and labor market data. A “jumbo” 50 point cut was also a possibility, although analysts were divided on whether or not the Fed had enough evidence to take such aggressive action. 

Prices dipped on Wednesday after a lukewarm CPI reduced expectations for a so-called “jumbo cut” from the Federal Reserve. Markets seem to have fully priced in a smaller 25 point interest rate cut, though, leading to a breakout gold performance leading into the second half of the week. With less than a week to go before the Fed meets, expectations for a larger cut seem to be back on the table, according to projections from CME Group’s FedWatch tool. 

#Gold is on yet another run, crashing through $2,575 and setting a fresh all-time high.

How high could the precious metal go? With all eyes on next week’s Federal Reserve meeting, gold’s historically bullish year may be far from over. pic.twitter.com/7uqH2u6K7c

— Hero Bullion (@HeroBullion) September 13, 2024

Analysts: September Fed Meeting Could Drive Gold Prices Even Higher

Expectations of a rate cut from the Fed have driven gold to a fresh all-time high, but it is still unclear how the actual rate reduction will influence gold price-action moving into mid-September. The correlation between gold prices and interest rates is hotly debated among economists; gold tends to increase in value as the federal interest rate declines, but gold prices increased in near-direct correlation with interest rate hikes in the period from 2021-2023.  

Goldman Sachs projects that gold prices may go even higher in the wake of interest rate cuts from the Federal Reserve. Samantha Dart and Lina Thomas, research strategists at Goldman Sachs, argue that central bank purchases, Fed rate cuts, and ongoing geopolitical stressors are three converging factors that might push gold to even loftier heights heading into Q4 2024 – and beyond. 

Of course, a large 50 bps rate cut would be the ideal scenario for gold bulls hoping for a strong short-term performance in metal markets. CME Group’s FedWatch tool now predicts a 45% chance that the Federal Reserve will move to cut the interest rate from 50 basis points, with a 25 bps cut slightly more likely at 55 percent. Given that an aggressive rate cut may inject uncertainty into American markets, expect the biggest gold reaction to come if the Fed feels confident enough to cut the interest rate by half a point. 

Gold broke another record this morning, securing a new all-time high within $20 of $2,600. Next week is poised to be a significant week for precious metal markets as traders await the first interest rate cut from the Federal Reserve in several years.