Gold Prices Soar as Fed Rate Cut Looms and Global Tensions Rise
1min read On September 13, international gold prices hit a new high as expectations for a Federal Reserve rate cut intensified. The December gold futures on the New York Commodity Exchange surged to $2614.6 per ounce, closing at $2606.2. The market’s anticipation of a Fed rate cut has driven a more than 20% rise in gold prices this year.
The Fed is scheduled to hold a monetary policy meeting on September 17-18. Last month, Fed Chair Jerome Powell indicated that the time for a rate cut had come, suggesting that a decision may be imminent.
Analysts agree that a rate cut is almost certain, though opinions differ on whether it will be a 25 or 50 basis point reduction. Since March 2022, the Fed has increased rates 11 times, totaling 525 basis points, maintaining a range of 5.25%-5.5%, the highest in 23 years. Persistent inflation and a weak labor market still pose challenges, prompting investors to consider gold as a hedge against a potential economic downturn.
Goldman Sachs predicts that the upward trend in gold will continue until early 2025, fueled by expectations of a rate cut and geopolitical tensions. Should the U.S. impose further financial sanctions or its debt issues worsen, gold prices could see additional upward pressure.
Several factors contribute to the rising gold prices. The ongoing trend of "de-dollarization" reduces the dollar's credibility on the global stage, adding to the allure of gold. Additionally, the Fed's anticipated rate cut is expected to boost the appeal of the non-yielding asset.
Gold prices experience short-term fluctuations, influenced by political events like the upcoming U.S. elections and the economic outlook. The overall weakening of the dollar supports a long-term upward trend for gold, despite these short-term volatilities.
This recent surge in gold prices is also attributable to the European Central Bank’s decision to cut rates, which, along with U.S. developments, bolsters investor interest. The gold market remains active, with global dynamics playing a critical role in sustaining its growth.