2024-02-21 13:28:00
© Reuters.
Investing.com – Goldman Sachs (NYSE:) analysts said that gold is expected to see the largest immediate price increase in the commodities sector due to potential interest rate cuts from the US Federal Reserve.
The US bank’s note issued on February 20 stated that the immediate increase in gold and copper prices from the Federal Reserve’s reduction in two-year interest rates by 100 basis points would be the largest for these metals. The bank’s analysts expected copper to rise by 6%, gold by about 3%, followed by oil by 3%.
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Copper for three-month delivery was traded on the London Metal Exchange (LON:) near a three-week high at $8,548 per metric ton on Wednesday, while spot reached a nearly two-week high at $2,031 per ounce.
However, the popular investment bank said it does not expect any significant price impacts for natural gas or agricultural commodities, as seasonal inventory cycles and weather outweigh any impact that might come from interest rate cuts.
The U.S. central bank is expected to cut the federal funds rate in June, according to a narrow majority of economists polled by Reuters, who also said the biggest risk is that the first rate cut will come later than expected.
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A strong majority of 86 of 104 economists in a Reuters poll conducted Feb. 14-20 said the Fed would first cut the federal funds rate — currently 5.25%-5.50% — next quarter, similar to last month’s poll.
But a slim majority, 53 out of 104, now expect June to be the most likely meeting for a rate cut, while another 33 expect a cut in May. The rest put forward the first cut sometime in the second half of 2024. No one expected a cut in March, compared to 16 in the previous poll.
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Meanwhile, it is expected to rise to 3,000 per ounce depending on which of three potential catalysts are set to move prices, according to Citigroup Inc. (NYSE:).
Gold, which is currently trading at $2,025, is expected to rise by about 50% if central banks sharply increase their purchases of the yellow metal, or in the event of a deep global recession, and also if stagflation occurs, says Akash Doshi, head of commodities at North America at City, to CNBC.
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