The Truth about Gold and Fed Easing Cycles

There is an often-quoted market adage: “In Wall Street, what has happened before will happen again.” It’s true. Investors who look at market cycles and invest accordingly can benefit from the knowledge of history.

That leads us to one of the biggest economic questions of 2024 for gold investors:

What does history tell us about how gold performs during Fed easing cycles?

New research from the Wells Fargo Investment Institute provides the answer: “the average price of gold has tended to rise quite nicely and for nearly 21 months, following the start of past Fed interest-rate easing cycles.”

Short answer is simple—gold trends higher and for almost two years once the Fed begins cutting interest rates.

What else does Wells Fargo say in their July 22nd research report?

“The bottom line is that gold fundamentals remain solid, and inflation rates have likely fallen enough for the Fed to begin cutting interest rates later this year. If this indeed occurs, history suggests that gold prices could move significantly higher for some time. We continue to recommend Precious Metals as one of our favorite Commodities sectors.”

Let’s explore what happened the last time the Fed started cutting interest rates.

One Year Later Where Was Gold?

On August 6, 2020, a year after the Fed started cutting rates, gold had climbed 44% to $2,059.90.

2024 Outlook for Gold

Let’s take a look at what J.P. Morgan said in mid-July about gold: “Many of the structural bullish drivers of a real asset like gold — including U.S. fiscal deficit concerns, central bank reserve diversification into gold, inflationary hedging and a fraying geopolitical landscape —have lifted prices to new all-time highs this year despite a stronger U.S. dollar and higher U.S. yields, will likely remain in place regardless of the U.S. election outcome this autumn,” said Natasha Kaneva, Head of Global Commodities Strategy at J.P. Morgan.

How high could gold climb in the months ahead?

J.P. Morgan predicts new all-time highs for gold. “The direction of travel is still higher over the coming quarters, forecasting an average price of $2,500/oz in the fourth quarter of 2024 and $2,600 in 2025,” according to Gregory Shearer, Head of Base and Precious Metals Strategy, at J.P. Morgan.

So, there you have it. History shows we are about to enter another big upswing for gold with the start of a new Fed easing cycle. Will you benefit from the knowledge of history? Explore current gold investment opportunities now.

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