The metal’s recent rally is strongly linked to the prospect of further interest rate cuts in the United States. The Federal Reserve (Fed) started a monetary easing cycle by reducing the interest rate by 0.50% last week
On Tuesday (24), the price of gold reached a new historical high, trading at $2,680.30 per troy ounce. However, on Wednesday morning (25), the precious metal remained stable, trading at $2,657.11, with a small positive change of 0.02% since the market opened.
In Tuesday’s trading session, the December gold contract also closed up 0.92%, reaching $2,677.00 per troy ounce.
What factors drive metal growth?
Gold’s recent rally is strongly linked to the prospect of further interest rate cuts in the United States. The Federal Reserve (Fed), the US central bank, started a monetary easing cycle by reducing the interest rate by 0.50% last week.
Since July last year, US markets have been trading at an interest rate between 5.25% and 5.50% per annum, the highest in 20 years. Now, with the reduction, investors are seeing gold as a safe haven, driving up its price.
Does China influence the gold market too?
In addition to the Fed, the People’s Bank of China (PBoC) also plays a major role in gold’s appreciation. The PBoC recently announced a package of stimulus measures for the Chinese economy, which contributed to the increase in the price of the metal. These measures are aimed at boosting the economy of China, one of the world’s largest consumers of gold.
Price projections until the end of the year
With this backdrop, several financial institutions have adjusted their gold price projections. German bank Commerzbank, for example, has raised its target price forecast from $2,500 to $2,600 per troy ounce by the end of the year.
“The Fed’s current projections suggest interest rate cuts” of “only 50 basis points this year and 100 basis points by the end of 2025”the bank said in a report.
What are the advantages of investing in metal now?
- Inflation Protection: Gold is an asset that traditionally increases in value during times of high inflation, acting as a store of value;
- Safety in times of uncertainty: In times of economic or geopolitical uncertainty, gold tends to be a safe haven for investors;
- Liquidity: Gold has high liquidity and can be easily converted into cash anywhere in the world;
- Diversification: Adding gold to your portfolio can reduce risk by diversifying your investments.
According to recent market movements and projections from financial institutions, gold continues to be an attractive option for investors seeking safety and continued appreciation.
NEW YORK (AP) — The gold rush has arrived. The precious metal has hit an all-time high this week. The spot price of gold closed Tuesday above $2,514, according to FactSet data. That was the highest closing price ever for the commodity.
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– BIV News (@bivnews.bsky.social) August 21, 2024 4:51 PM
Source: Terra
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