Gold prices surpassed their previous all-time high and hit a new record level of $2,570 per troy ounce on Friday, supported by expectations that the US Federal Reserve will cut interest rates aggressively, said Carsten Fritsch, Commodities Analyst at Commerzbank.
Expectations of big Fed rate cuts support gold
“The driving factor is the sharp rise in rate cut expectations since yesterday. It is worth noting that the US core consumer price index rose slightly more than expected in August, which should make a 50 basis point rate cut by the Fed next week less likely. Federal funds futures are currently pricing in a probability of around 45% for this.”
“However, the market still expects the Fed to cut interest rates by around 100 basis points by the end of the year, meaning rates would have to be cut by 50 basis points at one of the two remaining meetings after September. According to federal funds futures, another 100 basis points are expected to follow by mid-2025. Therefore, it is likely that due to these aggressive rate cut expectations for the coming months, the price of Gold is rising.”
“In Euro terms, too, Gold jumped to a new all-time high of over EUR 2,300 per troy ounce yesterday. Yesterday’s interest rate cut by the ECB likely provided a tailwind here, especially as the market also expects the ECB to cut interest rates further in the coming months.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
