Gold prices soared to a new all-time high of $2,570 per troy ounce on Friday, driven by growing expectations of aggressive interest rate cuts by the U.S. Federal Reserve, according to Carsten Fritsch, a commodity analyst at Commerzbank.
Fed Rate Cut Speculation Fuels Gold Rally
The primary catalyst behind the surge in gold prices has been a sharp increase in market expectations for significant Fed rate cuts. “The notable rise in rate cut expectations since yesterday is driving the market,” Fritsch explained. He also highlighted that the U.S. core Consumer Price Index (CPI) for August rose slightly more than anticipated, which could reduce the likelihood of a 50 basis point rate cut during the Fed’s upcoming meeting. Current data from Fed Funds Futures indicates a roughly 45% probability of such a move.
Despite this uncertainty, market sentiment remains focused on the expectation that the Federal Reserve will reduce interest rates by as much as 100 basis points by the end of the year. This would likely involve a 50 basis point cut at one of the two remaining meetings after September. By mid-2025, markets are pricing in an additional 100 basis points of rate cuts, Fritsch noted, adding that these forecasts are largely responsible for gold’s upward momentum.
