Gold’s Record Surge: Anticipating Federal Reserve’s Rate Cut Pivot in 2024
On Friday, Gold hit an all-time high of $2,075 an ounce – extending its winning streak for an eighth consecutive day – after Federal Reserve officials shifted their tone, inching closer to the long-awaited “pivot” away from aggressive interest rate hikes to the first rate cut in early 2024.
A series of Federal Reserve policymakers – including six who will vote on policy next year — indicated in recent days that they were comfortable with keeping rates steady at their December meeting, encouraged by the downward trend in inflation and data showing a slowing economy.
Earlier in the week, traders quickly latched onto comments by Federal Reserve Governor Christopher Waller – one of the central banks most influential voices – signalled that interest rates were unlikely to rise further and could be cut if inflation continued to slow.
According to Wall Street, conclusive evidence shows inflation has come down more rapidly than the Fed was expecting and that means that policymakers are likely to pencil in more cuts than they were willing to in September.
UBS expects the Fed will start cutting rates as soon as March, on the expectation that the U.S economy will slide into recession by the second quarter. This in turn will prompt the central bank to cut rates by 275 basis points next year, with the terminal rate plunging to 1.25% by early 2025.
Deutsche Bank, which is also forecasting a recession next year, reiterated its view this week that the Fed is likely to begin to cut in the second quarter of 2024 and reduce rates by a total of 175 basis points through year-end.
Meanwhile, Morgan Stanley’s predictions are even more bold. The Wall Street bank anticipates deeper cuts starting in June and then again in September and every meeting from the fourth quarter onward, according to their 2024 outlook report.
Elsewhere, Goldman Sachs sees the first 25 basis point rate cut in the fourth quarter of 2024, followed by one cut per quarter through mid-2026.
As traders know – “the bigger the rate cut, the bigger the rally in precious metals”.
If history is anything to go by, then this new shift in narrative almost certainty sets the stage for precious metal prices to continue breaking new all-time highs in the coming weeks and months ahead.
Gold Price Forecast
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