Gold rises to new highs after the Fed's 50-basis-point interest rate cut. According to Fed Funds Futures, a further interest rate cut of 50 basis points is to happen in either November or December. As long as markets expect it to happen in December, the upswing in Gold should continue, Commerzbank’s commodity analyst Carsten Fritsch notes.
“The Gold price rose to a new record high of more than $2,600 per troy ounce today, having reached this level for the first time on Wednesday following the Fed's 50-basis-point interest rate cut. Even though Fed Chairman Powell tried to emphasize at the press conference that such a rate cut should be the exception rather than the rule, the market is apparently not convinced.”
“According to Fed Funds Futures, a further 75 basis points of interest rate cuts are priced in by the end of the year. With two meetings remaining, this means a further interest rate cut of 50 basis points in either November or December. The market currently sees a slightly greater probability for December.”
“As long as these expectations persist, the upswing in Gold should continue. However, we expect only interest rate cuts of 25 basis points at each of the two meetings, which is why the rally in Gold should not go on forever.”
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