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After previous week’s Fed rate cut, the price of gold continues to surge towards new record highs. During Monday’s morning trading session, spot gold rose by 0.2% to $2627.34 per ounce, while gold futures on the New York Mercantile Exchange rose by 0.3%, to $2653.70 per ounce.
Following the Fed’s announcement of a 50-basis-point rate cut last Wednesday, precious metal prices have been on a continuous rise. This is due to market expectations of further rate cuts during the remaining two Fed meetings this year, which is further bolstering investment interest in gold.
The rate cut, combined with strong purchases by central banks and escalating demand for safe-haven assets due to ongoing conflicts in the Middle East and Ukraine, has collectively contributed to gold’s 27% surge year-to-date.
In a recent interview with Kitco News, Ryan McIntyre, Managing Partner at Sprott Inc., stated that while Federal Reserve Chairman Powell has hinted that the central bank is not in a rush to cut rates, the 50-basis-point cut has already demonstrated the Fed’s stance. The US sovereign debt continues to pose the biggest threat to the economy, and the Fed is most concerned about avoiding an economic downturn, which would lead to a sharp increase in deficits.
McIntyre pointed out that this is a perfect environment for gold, as the Fed is expected to continue lowering interest rates, and gold remains the simplest and most effective asset for wealth preservation and capital protection. He anticipates that in the near future, more and more investors will turn to gold for portfolio diversification, and the only question is when gold prices will surpass the $3000 per ounce mark.
In a recent report, analysts at UBS wrote that geopolitical tensions may persist beyond the fourth quarter, coupled with the numerous uncertainties surrounding the November US elections, indicating a positive outlook for gold prices to reach new highs.
UBS analysts have set a mid-term gold price target of $2700 per ounce for 2025. As for silver, hindered by weakness in base metals and the broader commodity market, as well as recent signs of weakness in China’s solar exports and domestic installation market, silver has lagged behind gold.
However, analysts believe that silver will still benefit from the rising gold price environment. With the silver market expected to remain in deficit in the coming years, this implies a continued reduction in above-ground inventories, which should help support silver prices. As the gold-silver ratio approaches the long-term level of 70, silver is expected to outperform in the next 12 months.
