Fed cuts rates 1/2% pushing gold to new record, up 24% YTD

Federal Reserve Starts Easing Cycle with a Jumbo Sized Rate Cut

The record-shattering gold rally of 2024 saw another burst of investor buying on Wednesday, following the Federal Reserve’s first interest rate cut of this easing cycle. The Fed came in big Wednesday with an aggressive half percent cut in benchmark fed funds rate.

Investors immediately bought gold after the news, which drove the precious metal to another record high above $2,600 an ounce on Wednesday afternoon. Stocks initially gained on the news, but quickly gave back some of the strength and the U.S. dollar fell following the Fed announcement.

New Fed Easing Cycle is Bullish for Gold

Gold is up an attention grabbing 24% since the start of the year and the Fed’s new monetary easing cycle is fresh gas in the tank for the rising bull trend in precious metals.

The Fed policymaker voted to cut the benchmark interest rate by half a percent at today’s meeting to 4.5% to 5.00%. In the Fed’s policy statement, it said the move reveals “greater confidence that inflation is moving sustainably toward 2%” and that the central bank “judges that the risks to achieving its employment and inflation goals are roughly in balance.”

While inflation remains above the Fed’s 2% target rate, it has fallen from a peak of 9.1% in 2022. The most recent consumer price index (CPI) came in at 2.5% annualized in August.

The 50 basis point rate cut was more aggressive than some on Wall Street had expected. But, the jumbo-sized rate cut was warranted given the recent sign of slowdown in the labor market.

Also bullish for gold was news from the Fed’s so-called “dot plot” which features future interest rate cuts.

Deeper and faster interest rate cuts are now forecast, which will be jet fuel for the current rising price cycle in gold. Fourteen of the nineteen central bankers expect interest rate cuts of at least two full percentage points by the end of 2025.

Wall Street Eyes Next Big Gold Target at $3,000 an Ounce

The start of the Fed easing cycle will help gold continue higher. New forecasts from Citi Research reveal analysts there say gold could reach $3,000 an ounce by mid-2025 amid the interest rate cutting cycle and strong physical demand.

Are You Sitting on the Sidelines?

Today’s news is the start of a fresh move higher in gold. It’s the perfect time to consider your personal financial situation. Have you bought gold or increased your allocation in 2024?

How much is enough? Recent research from the well-respected CPM Group stated that over the past 50 years, the best return of a portfolio including stocks, bonds, and gold was for portfolios that have around 25% -30% of their value in gold. This new phase in the gold rally is just getting started, with $3,000 as the next major target. If you’ve been considering buying gold, this is the perfect time to make your move. Give us a call, we are here to help.

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