Gold Rush Ahead: Fed Rate Cuts Spark $3,730 Gold Outlook

CITIC Securities predicts that the U.S. Federal Reserve will cut interest rates by 25 basis points at its policy meeting in September 2025, followed by two additional 25-basis-point cuts in October and December of the same year. This forecast aligns with broader market expectations and recent economic indicators suggesting a cooling labor market. According to the firm, the central bank’s decision to ease monetary policy will be driven by signs of slowing economic momentum and subdued inflationary pressures, which have created a more favorable environment for rate reductions.

The basis for this prediction is partly rooted in the weak August jobs report, which showed the addition of only 22,000 jobs—far below the expected 75,000—indicating a weakening labor market. This outcome has reinforced expectations among traders and analysts that the Federal Open Market Committee (FOMC) is likely to take a more accommodative stance. Over 88% of market participants now anticipate a 25-basis-point cut in September, with a smaller but growing minority (about 12%) expecting a 50-basis-point reduction. The probability of a 25-basis-point rate cut has been steadily rising in the weeks leading up to the FOMC meeting.

CITIC Securities’ projection also reflects broader institutional forecasts. For instance, Bank of America has revised its stance, moving from a no-cut scenario to one that includes two 25-basis-point reductions in September and December. Goldman Sachs forecasts three 25-basis-point cuts, beginning in September and continuing through November, while Citigroup anticipates a cumulative 75-basis-point reduction across September, October, and December. These forecasts highlight a growing consensus among major financial institutions that the Federal Reserve will adopt a front-loaded rate-cutting strategy in 2025.

The potential easing of monetary policy is expected to have a broad economic impact. Lower interest rates typically stimulate borrowing and investment, which can boost asset markets, including equities and commodities. CITIC Securities has noted that gold prices could benefit from these developments, as investors seek safe-haven assets amid accommodative monetary conditions. The firm models a scenario under which gold prices could exceed $3,730 per ounce by the end of the year, driven by factors such as central bank purchases, geopolitical risks, and evolving fiscal policy.

Analysts at CITIC also point to the broader implications of a rate-cutting cycle for the banking sector. The firm’s recent research report on the industry highlights a stabilization in profits and a recovery in asset quality, with banks expected to benefit from the expansion of credit and improved market conditions. While the pace of credit issuance has moderated in recent quarters, the overall liquidity environment remains supportive, and a reduction in interest rates could further enhance lending activity and profitability.

The anticipated rate cuts also signal a shift in the Federal Reserve’s approach to its dual mandate of maximum employment and price stability. With inflationary pressures easing and labor market dynamics softening, the central bank appears to be prioritizing the preservation of employment while allowing for a more gradual normalization of interest rates. This shift has been echoed in public comments by Federal Reserve Chair Jerome Powell, who outlined a more flexible stance toward rate cuts during his keynote speech at the Jackson Hole Economic Symposium in August.

Market participants continue to monitor incoming economic data closely, as any divergence from current expectations could influence the timing and magnitude of rate cuts. However, based on the current trajectory of the economy and policy outlook, CITIC Securities and other major institutions have aligned their forecasts with an aggressive easing cycle, underscoring the growing likelihood of a 25-basis-point rate cut in September and further reductions in the subsequent months.

Source: [1] CITIC Securities: Predicts that gold prices are expected to ... (https://www.chaincatcher.com/en/article/2203103) [2] CITIC Securities: Gold price is expected to exceed ... (https://www.odaily.news/en/newsflash/446489) [3] CITIC Securities: Bank interim reports show stable recovery in profits (https://news.futunn.com/en/post/61574189/citic-securities-bank-interim-reports-show-stable-recovery-in-profits) [4] Banking giants now forecast at least two interest rate cuts ... (https://cointelegraph.com/news/banking-giants-forecast-two-interest-rate-cuts-2025) [5] Timiraos: Soft jobs report will make it easier for Fed to ... (https://investinglive.com/centralbank/timiraos-soft-jobs-report-will-make-it-easier-for-fed-to-agree-on-25-bps-cut-20250905/)