Gold Prices Rally to Record High After FED Chair Jerome Powell Provides Update on Possible Interest Rate Cut 

Gold (COMEX: $GC=F) has been viewed as a valuable commodity throughout history. In the modern financial system, Gold is seen as a hedge against volatility since market forces that impact most assets often have a lesser impact on the price of gold. 

Recently, Gold rates broke through a year high on Thursday, reaching above the $2,300 per ounce mark driven by a possible Fed rate cut.

Gold is up 11.64% this year and analysts predict it could rise to $2,600 at the end of this year. There are several factors that have influenced the surge, such as the looming federal rate cut and other geopolitical reasons.

Jerome Powell Provides Update on Rate Cut

Gold prices rose to a new high after Federal Reserve Chair Jerome Powell reiterated that the Fed will start cutting rates this year. On Wednesday at Stanford University, he said that ” the recent data do not … materially change the overall picture.”

He added, “’Most Fed officials see it as likely to be appropriate to start cutting their key rate at some point this year.” When Powell reiterates the Fed wait-and-see approach, the cut rates remain unmoved.

The shift in the Federal Reserve’s policy is positive for non-interest-bearing Gold. Investors have jumped into the bullion market despite the Fed hiking rates during that period. Traditionally, a hike in rates causes investors to jump into Treasuries. 

During a recent interview, Cao Liulong of Founder Securities theorized that the recent price trend was driven by deglobalization. He stated that the world could be entering an era without a global reserve currency, thus bolstering the case for a decade-long bullish trend for gold. 

Commenting on the Fed Chair’s remarks, Bart Melek of TD Securities said, “That is a very gold positive as it suggests that the Fed will cut significantly before the inflation target is reached.”

Analysts Forecast $2,600 for Gold in 2024

As the Gold price continue to rally, investors are actively discussing the factors driving its ascent and speculating on its potential upward trajectory in the near to medium term.

During a recent CNBC interview, Juerg Kiener, the CIO of Swiss Asia Capital said, “If you look at your forward curve for a year it’s about 26 [$2,600]. I think we might be really fast as we take 23 [$2,300] out, it has a lot of pent-up demand.”

He added, “It puts probably a lot of structures which are in the market playing gold at risk too, because [traders] might not be able to cover [their short positions]. And if I say that 26 is for me just a forward curve, in case we get a short squeeze the numbers will go much higher.”

Kiner also pointed to geopolitical factors, stating that the shift to a “multipolar world,” and ongoing reorganization of international trade could be behind the recent surge. 

Other analysts have cited geopolitical factors, including the ongoing Ukrainian conflict, the Middle East conflict, the upcoming US election, and the possibility of a global recession. 

Gold prices surged on Wednesday in Asia after the catastrophic earthquake in Taiwan, increasing safe-haven demand and pushing the price above $2,300.

Gold Price Trend

Gold $GC=F is currently trading at $2,349, a gain of 1.76% from its previous price of $2,308 per ounce. Analysts forecast the bullish momentum will continue, with estimates of as high as $2,600 per ounce.

Should You Buy Gold?

Gold has recently hit all-time highs, but the news has been overshadowed by the stellar performance of the Nasdaq Composite and S&P 500. If you feel like the stock market rally is about to cool off, gold could be a great safe-haven asset to hold as a hedge against a possible recession. However, that comes with high risk and is best suited for investors with long-term horizons. 

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