The yellow metal rises: Gold rose to a new record above $2,600 an ounce after the U.S. Federal Reserve cut its benchmark interest rate by half a percentage point.
The US Federal Reserve’s decision is seen as an aggressive start to a policy shift aimed at strengthening the US labour market.
Following the Federal Reserve’s two-day meeting, published projections showed a narrow majority of 10 of 19 policymakers were in favor of cutting rates by at least an additional half-point during the U.S. central bank’s two remaining meetings this year.
Treasury bond yields and the Dollar witnessed a decline after the decision to cut rates.
Notably, gold has a tendency to benefit from lower rates and rose as much as 1.2 percent before erasing gains after Fed Chairman Jerome Powell, in a press conference, announced that no one should view this as a “new pace.”
According to Will Rhind, founder of investment firm GraniteShares Advisors, with the start of the rate-cutting cycle, interest rates are coming down and the strength of the dollar will begin to wane.
“The next push for gold will be if there is a feeling that we are heading into a recession and the fear factor kicks in and people need to start buying gold as a hedge,” Rhind added.
Gold prices have soared spectacularly this year, rising more than 24 percent to hit successive records.
While the rally in early 2024 was supported by demand from emerging markets, particularly from central banks and Asian consumers and investors, in recent months the focus has been squarely on the Federal Reserve and the outlook for the US economy. Unprofitable bullion typically benefits in a low-rate environment, and recession concerns tend to drive investors to seek safety in gold.
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