Gold: Fed rate decision can trigger new all-time highs – Commerzbank

Gold price is waiting for the Fed interest rate decision. The price is off its all-time highs for now. For Gold to rise back and, probably, above the all-tine high price, interest rates would have to be cut by 50 basis points, Commerzbank’s commodity analyst Carsten Fritsch notes.

Further interest rate cuts need to be signaled very clearly

“The Gold price has retreated somewhat from its record high of $2,590 per troy ounce recorded at the beginning of the week, and is currently trading around $20 lower. The price increase to the aforementioned record high was largely driven by expectations that the US Federal Reserve would cut interest rates by 50 basis points at its meeting that started yesterday.”

“According to the Fed Funds Futures, the probability of this is around 60 percent. Should the Fed, as we expect, cut interest rates ‘only’ by 25 basis points, this is likely to cause disappointment in the market and thus weigh on the Gold price.”

“If these do not deviate too much from current market expectations, the downside potential for Gold should be limited. For Gold to rise and mark new all-time highs following the Fed meeting, interest rates would have to be cut by 50 basis points today and, in addition, further substantial interest rate cuts would have to be signaled very clearly.”