EBC Markets Briefing | Gold at record highs with probable three Fed rate cuts

Gold hit a record and bonds rallied on Wednesday as traders added to bets the Fed will cut interest rates three times this year after Goldman Sachs Group said conditions were ripe for easing.

Two quarter-point rate reductions are fully priced in for 2024, with market-implied odds of a third cut reaching about 60% on Monday due to softer-than-expected employment and inflation data.

Contributing to the repricing was persistent demand for October federal funds futures contracts. Volume in the contract reached a record level last week.

Expectations for an economic slowdown were widespread. Lower yields helped propel gold sharply higher overnight and through chart resistance around $2,450 per ounce despite a broadly firm dollar.

According to ANZ, India’ appetite could help extend the current gold rally and push the price of gold to $2,500 and beyond as structural shifts in the economy will help support physical gold demand.

The bank also noted “the RBI has become the second-largest gold buyer this year … The buying volume in H1 implies the total addition this year could hit above 70t if the pace of buying continues.”

Bullion has strengthened the case for a sustained uptrend with the next potential resistance seen at $2,500. The upsurge could tempt more buyers to join the party until the price falls below the trendline.

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