Gold $2500 'Only Getting Started' Ahead of Fed Rate Cuts, Trump-Harris Debate
Tuesday, 9/10/2024 14:25
The PRICE of GOLD rallied on Tuesday while global stock markets stalled after yesterday's rebound ahead of next week's US Federal Reserve interest-rate cut and tonight's televised debate between US presidential hopefuls Donald Trump and Kamala Harris.
Bottoming at $1160 per Troy ounce mid-way through Republican candidate Trump's first term in the White House, gold priced in the Dollar has shown gains of more than 110% over the past 6 years, adding 25.7% since March 2022, when the Federal Reserve began hiking US Dollar interest rates from the Covid pandemic's record low of 0% to the current 2-decade high of 5.33%.
The S&P500 index of US stocks – against which recently
gold hit an extreme positive correlation – has meantime shown gains of more than 92% since summer 2018, adding 27.9% during the Fed's post-pandemic rate hiking cycle.
Trading at $2512 per Troy ounce on Tuesday, "Gold's rally is
just getting started," says Dutch bank ING, predicting that "the most anticipated US rate cut in decades will bring fresh impetus to gold prices" and revising its 2025 average gold price forecast up to $2700 per Troy ounce.
Gold in 2024 has so far averaged $2287 at London's 3pm benchmarking auction, a rise of 17.9% from last year's average and 11.1% above
the consensus analyst forecast in January.
ING's outlook echoes
last week's call to "Go for gold" from US investment bank Goldman Sachs – now swapping its failed tip for copper to keep rising from May's all-time highs with a recommendation on the precious metal because "imminent Fed rate cuts are poised to
bring Western capital back into the gold market."
Giant gold-backed ETF the GLD did not change in size for the 5th session running on Monday, holding at its largest since mid-January.
No.2 gold ETF the IAU was also unchanged in size yesterday, remaining at its largest since mid-August.
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Positioning in the futures market for next week's Fed meeting has now adjusted from putting a 50-50 chance on a steep half-point cut this time last month to pricing that likelihood at only 1-in-4, according to data from derivatives exchange the CME's FedWatch tool.
But the consensus bet still believes that the US central bank will cut further from today's 2-decade high of 5.33% to barely 4.25% by Christmas before slashing rates down to 2.89% by the end of 2025.
The Fed itself will update its policy team's "dot plot" forecasts alongside next Wednesday's decision. Last time, in June, those projections raised both the end-2024 and end-2025 interest rate outlook, up to 5.1% and 4.1% respectively.
One-year US Dollar swap rates today held at 4.28% while 2-year swaps traded at 3.73%.
"In all the market volatility over the past month and political uncertainty ahead of us," adds ETF trust-fund provider WisdomTree, "gold has clearly been a winner. We expect it to continue [and while] gold will benefit from the monetary stimulus, fears around a potential trade war could drive the metal up even further."
New data overnight said world No.2 economy China saw its trade surplus soar to an August record last month
thanks to exporters rushing to beat the imposition of
additional US trade tariffs promised by both Donald Trump and Kamala Harris – set for their first televised election debate – whoever should win the White House in November.
US consumers borrowed $25 billion in July, twice the sum analysts expected.
Household and business confidence in major commodity producer Australia both fell on the latest Westpac and NAB surveys.
The
UK gold price in Pounds per ounce meantime rose Tuesday morning to touch its highest in 3 weeks at £1919 as Sterling held below $1.31 on the currency market following weaker-than-expected average earnings data.
While weekly wages including bonuses slowed to 4.0% annual growth – the slowest since November 2020 – the UK's unemployment rate also fell, down to 4.1%.
That was still half-a-percentage point above late-2022's four-decade low.
Euro gold prices today rose to 2-week highs at €2273 as the EuroStoxx 600 index reversed yesterday's rally ahead of Thursday's interest-rate decision from the 20-nation European Central Bank – almost universally expected to bring the 2nd cut of the year.
"While the vision is bold, the politics are practically impossible," says the Politico website of yesterday's
EU competitiveness report from former ECB chief Mario Draghi, which calls the USA and China's dominance in tech an "existential challenge" and warns that economic growth will continue to slide as the Union's demographics mean that "We're going to be a society that basically shrinks."
Silver rose together with the gold price on Tuesday, also regaining half of Friday's drop to trade back at $28.40 per Troy ounce.
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