Gold prices surged above $2,620 for the first time in history on Friday, outshining other assets, including stocks and cryptocurrencies, which saw declines following Thursday’s rally. Investors’ excitement gave way to caution as concerns grew about future economic growth, with Wall Street questioning if the Federal Reserve’s recent 50 basis point (bps) rate cut was too delayed to ensure a “soft landing” for the economy.
Some analysts have raised alarms about the Fed’s aggressive rate cut and its plans for further reductions, warning of the potential for a bubble in stock prices as investors chase gains. Federal Reserve Governor Michelle Bowman, the lone dissenter in the Fed’s decision, argued that the rate cut might have been premature, as inflation has yet to fall to the central bank’s 2% target. Bowman expressed concern that the larger cut could be seen as an early victory in the battle against inflation, when it remains unresolved.
While the U.S. Federal Reserve has moved forward with its rate cuts, other major central banks like the Bank of England held rates steady, and the Bank of Japan chose not to hike rates further. This divergence in policy has had varying impacts across markets, notably sparking volatility in the cryptocurrency sector, which had seen a downturn in response to the Bank of Japan’s July decision.
Despite Friday’s slight pullback, U.S. equities ended the week in positive territory, with the Dow finishing up 0.09%, while the S&P 500 and Nasdaq saw minor losses of 0.19% and 0.36%, respectively. Analysts expect volatility to continue, especially with the upcoming U.S. elections weighing heavily on market sentiment. However, there is growing optimism, supported by the U.S. 2Y/10Y Treasury spread turning positive for the first time since June 2022, signaling a potential shift towards riskier assets.
Bitcoin and Cryptos: Bullish Q4 Outlook Despite Pullback
Bitcoin (BTC) has also experienced significant activity, extending its weekly rally with an 11% gain amid central bank decisions. After reaching a high of $64,142 on Friday morning, Bitcoin has since consolidated below $63,000, trading at $62,920 at the time of writing. Analysts at Secure Digital Markets noted that market activity in Bitcoin appears “overstretched,” and they anticipate a near-term pullback to around $61,000.
Despite the recent correction, many analysts are optimistic about Bitcoin’s future, particularly as it heads into the fourth quarter. Kevin Svenson, a well-known trader, predicted new all-time highs for Bitcoin in Q4, driven by bullish technical signals such as a breakout in the Relative Strength Index (RSI). Svenson expects that, while the market may experience some volatility, Bitcoin could continue to trend upwards into 2025.
Similarly, market analyst Rekt Capital highlighted that Bitcoin is on the verge of entering a “parabolic phase” after months of re-accumulation following the most recent halving event. Rekt Capital anticipates that this phase could last for around 400 days, potentially culminating in a bull market peak by mid-2025.
As markets digest the implications of the Fed’s rate cut and other macroeconomic developments, gold, Bitcoin, and equities remain closely watched, with both risks and opportunities on the horizon for investors.
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