Gold prices at new highs after latest Fed rate cut

Gold climbs to new highs after Fed cuts interest rate by 50 basis points. According to Fed Funds Futures, another 50 basis point interest rate cut will occur either in November or December. As long as markets expect that to happen in December, gold’s rally should continue, notes Carsten Fritsch, commodities analyst at Commerzbank.

Gold at new highs after last FOMC

“The price of gold rose to a new record high of over $2,600 per troy ounce today, having first touched that level on Wednesday following the Fed’s 50 basis point interest rate cut. Even though Fed Chairman Powell tried to point out at the press conference that such a rate cut should be the exception rather than the rule, the market seems unconvinced.”

“According to Fed Funds Futures, another 75 basis points of interest rate cuts will be priced in by the end of the year. With two meetings remaining, this means a further 50 basis point rate cut in either November or December. Currently, the market sees a slightly higher probability for December.”

“As long as these expectations persist, gold’s rally should continue. However, we only expect 25 basis points of interest rate cuts at each of the two meetings, which is why gold’s rally should not continue forever.”