How the Fed rate cut affects gold
When the Federal Reserve lowers interest rates, the opportunity cost of holding gold decreases.
Gold, which does not generate interest, becomes more attractive compared to assets that do, such as bonds.
As a result, investors often turn to gold in a low-rate environment, driving its price higher.
Gold prices are already meeting expectations
Gold prices have already shown signs of reaction to the possibility of a rate cut by the Fed.
Prices hit near-record highs before easing slightly in recent days.
Market experts believe the size of the rate cut will determine how much further gold will rise.
Sugandha Sachdeva, Founder, SS WealthStreet, noted that “Gold prices tend to rise as the Federal Reserve moves towards rate cuts. This creates favourable conditions for further gains in the precious metal.”
What will happen if the Fed aggressively cuts rates?
If the Fed opts for a larger rate cut (say, 50 basis points), gold could experience an even sharper rise.
Aakash Doshi, head of commodities at Citi Research, noted that the market is watching closely.
“An aggressive cut will further boost gold prices as investors seek safe haven assets in a weaker economy,” Doshi said.
Gold outlook amid Fed rate cuts
The rest of 2024 looks promising for gold, according to experts.
Many believe that gold prices It could test new highs in the coming months, particularly if the Fed cuts rates aggressively.
Colin Shah, CEO of Kama Jewelry, expects the positive trend to continue, supported by macroeconomic volatility and upcoming elections in several countries.
The festive season, including Dhanteras, is likely to see increased demand for gold.
This will push prices To new heights.
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