US Fed rate cut drives gold, silver prices: Should you invest in precious metals now?
Gold prices remained stable on Thursday (September 19) after reaching a record high in the previous session. Spot gold held steady at $2,562.85 per ounce.
This was slightly down from its record peak of $2,599.92 per ounce set on Wednesday.
US gold futures saw a minor decline of 0.4%, trading at $2,587.40 per ounce. Silver, on the other hand, saw an increase of 0.7%, reaching $30.26 per ounce.
In India, the 24-carat gold rate was ₹73,270 per 10 grams. Silver was quoted at ₹88,050 per kilogram.
Reasons behind the movement
The US Federal Reserve’s unexpected half-percentage-point rate cut drove the recent fluctuations in precious metal prices.
The Fed’s move, aimed at supporting the labour market and sustaining low unemployment rates, was larger than many anticipated.
Fed Chair Jerome Powell noted that despite easing inflation, the economy remained robust with a current 4.2% unemployment rate.
“In the short-term, gold is likely to see some profit-taking, but its longer-term trajectory remains upward. Gold is expected to hit new highs between $2,640 per ounce and $2,700 per ounce this year, with softening economic data potentially pushing prices higher,” Kelvin Wong, Senior Market Analyst for Asia Pacific at OANDA, was quoted as saying in a Reuters report.
What lies ahead
Traders are currently anticipating a 70% chance of a 25 basis-point reduction at the Fed’s November meeting, with a 30% chance of a 50-bp cut.
This environment of low interest rates typically favors zero-yield assets like gold and silver, boosting their appeal as safe-haven investments.
Geopolitical tensions, such as recent explosions in Lebanon involving Hezbollah, have also contributed to the increased demand for precious metals.
These events create additional uncertainty, often leading investors to seek safety in gold and silver.
Investment strategies
Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, advised, “Investors should consider adding precious metals like gold and silver to their portfolios, especially until there is more clarity on market direction.”
Hareesh V, Head of Commodities at Geojit Financial Services, noted, “The Fed’s rate cut might initially pressure gold prices due to a stronger US dollar, but the underlying threat of an economic slowdown could boost safe-haven demand for gold and silver.”
Renisha Chainani, Head of Research at Augmont – Gold For All, highlighted, “While we may see some profit booking and retracement, gold is expected to stabilise around $2,500 per ounce to $2,475 per ounce in the near term.”