Gold prices have surged to new record highs, surpassing $2,600 per troy ounce, after the Federal Reserve’s recent decision to cut interest rates by 50 basis points. Commerzbank’s commodity analyst, Carsten Fritsch, notes that this move has ignited expectations for further rate cuts, with futures indicating a potential additional 50 basis point reduction in either November or December.
Despite Fed Chairman Powell’s emphasis that such cuts should be exceptions, the market appears skeptical. Fed Funds Futures suggest that investors are pricing in a total of 75 basis points in cuts by year-end, with December holding slightly higher odds for a follow-up cut.
Fritsch believes that as long as these expectations remain, gold’s upward trajectory will continue. However, he cautions that if the Fed only implements 25 basis point cuts at each of the remaining meetings, the current rally may not be sustainable long-term.
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