Can the Fed’s decision trigger new all-time highs in the price of gold?

Gold price awaits Fed interest rate decision. The price is currently at an all-time high. For gold to rise back, and perhaps above the high price, interest rates would need to be cut by 50 basis points, notes Carsten Fritsch, commodities analyst at Commerzbank.

Other interest rate reductions must be clearly signaled

“The price of gold has eased somewhat from the record high of $2,590 per troy ounce hit earlier in the week and is currently trading about $20 lower. The rise in price to the above-mentioned record level was largely driven by expectations that the US Federal Reserve will cut interest rates by 50 basis points at its meeting that began yesterday.”

“According to Fed Funds Futures, the probability of this is about 60%. If the Fed, as we expect, cuts interest rates by “only” 25 basis points, it is likely to cause market disappointment and thus weigh on the price of gold.”

“If they don’t deviate too much from current market expectations, gold’s downside potential should be limited. For gold to rise to new all-time highs following the Fed meeting, interest rates would need to be cut by 50 basis points today, and further substantial further rate cuts would need to be very clearly signaled.”