According to the Wise Finance APP, on Wednesday, Eastern Time, the FOMC meeting of the Federal Reserve lowered the federal funds rate target range by 50 basis points to 4.75%-5.00%, marking the first rate cut since March 2020. Gold showed strength after the Fed's September statement. At the New York closing on Thursday (September 19), spot gold rose by 1.09% to $2586.74 per ounce, with an intraday trading range of $2551.41-$2594.90, approaching the historical high of $2600.16 set after the Fed announced a larger-than-expected 50 basis point rate cut on Wednesday. Debon Securities stated that with the implementation of this Fed rate cut, if there are no new catalysts in the short term, the gold price is expected to fluctuate around $2600 per ounce. Historically, gold prices tend to rise during rate cut cycles.
From the current rate cut situation, this 50 basis point rate cut exceeded market expectations. At the same time, the Fed's statement showed increased confidence in inflation, steadily moving towards 2%. The Fed lowered its 2024 U.S. GDP growth forecast to 2.0%; lowered the 2024 U.S. core PCE inflation forecast to 2.6%; and raised the 2024 U.S. unemployment rate forecast to 4.4%. Looking ahead to future rate cut expectations, Fed policymakers expect the federal funds rate to be 4.4% by the end of 2024, down from the June forecast of 5.1%; they expect the rate to be 3.4% by the end of 2025, down from the June forecast of 4.1%; and they expect rates of 2.9% by the end of 2026 and 2027, down from the June forecasts of 3.1% and 2.8% respectively.
The Fed rate cut marks the beginning of a change in U.S. monetary policy. With the implementation of the rate cut, the gold price may converge towards $2600. However, on the other hand, the London gold price quickly fell back after reaching $2600, closing around $2560 per ounce on the 19th, bringing some selling pressure from the larger-than-expected rate cut. As of September 10, 2024, COMEX gold net long positions were around 24,231 contracts, close to the levels before the Fed rate cut in 2022. With the rate cut in place, if there are no new catalysts, the short-term judgment is that the gold price will fluctuate around $2600 per ounce.
Historically, gold prices tend to rise during rate cut cycles. According to institutional calculations, understanding gold price changes on a monthly basis and real interest rate changes, from February 2000 to June 2024: 1) the average modified duration of gold is 56, with an average convexity of 88033; 2) the results of the second regression are y=0+(-11.4251)*x^1+(14.3731)*x^2. These parameters can provide some reference for the extent of gold price changes with future rate cuts, potentially opening up new upward space for gold prices.
In early July, gold prices continued to rise significantly, reaching $2,484 per ounce on the 17th, hitting a historical high. Subsequently, due to profit-taking by investors and increased market volatility, gold prices retreated slightly but still retained most of the recent gains, reaching new historical highs again after the September rate cut
The resilience of gold prices largely reflects the attractiveness of gold as a safe-haven asset in the high uncertainty of the economic and geopolitical environment. Professional investors' bullish sentiment towards gold is increasing, and a considerable number of investors are waiting for better prices to enter the gold market. Therefore, it is not surprising that there has been a large influx of buying orders during the recent decline in gold prices, significantly pushing up the bottom price of gold.
The trading conditions of major gold investment products all reflect a strong bullish sentiment. In mid-July, the net long positions of CME (Chicago Mercantile Exchange Group) gold futures reached a four-year high, and despite some profit-taking in the later part of the month, it only slightly retreated. Similarly, funds flowed into gold ETPs (Exchange-Traded Products) for the third consecutive month in July, with the total holdings climbing to a five-month high in the later part of July.
The increasing interest of investors in gold helps offset the impact of the recent slowdown in official sector gold purchases worldwide. It is worth emphasizing that although the pace of buying has slowed down, the total gold purchases by the official sector remain robust when measured against historical standards. Against the backdrop of escalating geopolitical tensions and growing concerns over sovereign debt issues in the US and Europe, official sectors still have sufficient reasons to diversify their international reserves.
Looking ahead, given the numerous macroeconomic and geopolitical uncertainties that will continue to favor gold investments, MetalsFocus remains bullish on the outlook for gold.
In the short term, considering the escalating concerns about economic recession, the unwinding of carry trades, and the US stock market still being at high levels, there is still room for further selling pressure. Volatility remains high, and the risk of further deleveraging may limit the upside potential of gold prices. Once the interest rate cut cycle begins in September, both bond yields and the US dollar exchange rate may decline more significantly. This is expected to drive further funds into the gold market, and accordingly, gold prices are likely to hit new highs from the fourth quarter of 2024 to the second quarter of 2025.
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The Federal Reserve lowered the federal funds rate by 50 basis points to 4.75%-5.00% at the FOMC meeting, marking the first rate cut since March 2020. Following the rate cut, the spot gold price rose, approaching the historical high near $2600 per ounce. Debon Securities pointed out that without new catalysts, the gold price is expected to fluctuate around $2600 in the short term. The Federal Reserve also lowered its 2024 U.S. GDP and core PCE inflation expectations, while raising its unemployment rate expectations, indicating a cautious stance on the economy

- The Federal Reserve lowered the federal funds rate by 50 basis points to a target range of 4.75% to 5.00%, marking the first rate cut since March 2020.  
- Following this announcement, gold prices surged, reaching nearly $2,600 per ounce, although they later retreated to around $2,560.  
- Analysts predict that gold prices may fluctuate around $2,600 in the short term, driven by economic uncertainties and increased investor interest in gold as a safe-haven asset.

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Hong Kong Stock Concept Tracking | The Federal Reserve cuts interest rates by 50 basis points more than expected! Spot gold breaks through $2600 to hit a historical high, opening up a whole new upside space for gold (with concept stocks)