Gold prices gains over 1% recently as the Federal Reserve launched a deeper cycle of rate cuts, signaling a potential shift in monetary policy. This move, which included a half-percentage-point cut, has pushed gold prices to near record highs. Given the ongoing economic uncertainty and geopolitical tensions, this trend offers valuable insight for investors.
Impact of the Federal Reserve’s Rate Cut on Gold
On Thursday, spot gold increased by 1.2%, reaching $2,590.47 per ounce. This spike followed the Federal Reserve’s decision to lower the benchmark interest rate by 50 basis points, bringing the range to 4.75%-5.00%. As a result, gold hit a record $2,599.92, nearing the critical $2,600 mark.
Policymakers are projecting further cuts, with another half-point reduction expected by the end of this year. These moves are likely to drive the value of the U.S. dollar down, creating an environment where gold continues to thrive.
Factors Behind Gold’s Recent Rally
Several factors contribute to gold’s recent gains. First, the weaker U.S. dollar, due to rising fiscal and trade deficits, has encouraged investors to seek safe-haven assets. Second, the current low-interest environment, along with central bank buying, has created additional support for the gold market. UBS analysts predict this rally could continue, with gold potentially reaching $2,700 per ounce by mid-2025.
In addition to gold, other precious metals are benefiting from these trends. Spot silver jumped 3.5% to $31.11 per ounce, while platinum and palladium rose by 2.3% and 2.6%, respectively.
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