Gold price benefits from rate cut hopes and tensions in the Middle East – Commerzbank
The morning brought a glimmer of gold as its price escalated to just shy of $2,470 per troy ounce, inching closer to the mid-July record highs. This surge comes in the wake of Federal Reserve Chairman Jerome Powell’s remarks on Wednesday evening, hinting at a potential rate cut in September, as observed by Carsten Fritsch, a commodity analyst at Commerzbank.
Following Chairman Powell’s press conference that concluded the Fed’s meeting, anticipation for a rate reduction has intensified among investors. “The market firmly expects a first rate cut in September, as indicated by Fed Funds Futures,” Fritsch points out. The recent downturn in US economic performance has fueled expectations even further, with speculations about a possible 50 basis points cut, despite Powell’s previous dismissal of such a steep reduction. The upcoming US labor market data garners attention in this context, especially after Powell highlighted the Fed’s increased emphasis on employment figures. Should the incoming data disappoint, it could lead to heightened speculation around interest rate adjustments, potentially driving the gold price upwards.
Nonetheless, there remains a degree of skepticism regarding the sustainability of this upward price movement. “Our expectation is limited to two interest rate cuts by the Fed by the end of the year, in contrast to the market’s anticipation of three,” Fritsch elaborates. Despite this cautious outlook, gold continues to find support from geopolitical strains. Recent escalations in the Middle East are contributing to gold’s appeal as a safe haven, bolstering its price amidst global uncertainties.
In conclusion, gold’s current price performance is riding on a wave of factors including speculative interest rate cuts by the Federal Reserve and geopolitical tensions in the Middle East. While the future trajectory for gold prices may be uncertain, its role as a bastion of stability in turbulent times remains undisputed, drawing investors towards it as a reliable store of value.
