The Federal Reserve (Fed) of the United States announced a 0.2 percentage point interest rate cut last week on September 18. It is expected that the U.S. dollar will continue to weaken, coupled with escalating geopolitical tensions. On September 25, the price of gold rose by 1.44% to reach $2,666.25 per ounce, marking a new all-time high. Gold prices have surged by 27% so far this year.
In 2024, gold prices have hit several new highs. The first occurred in March when the price climbed to $2,160 per ounce, up 8% from the historical high of $2,135 in December 2023. Subsequently, new highs were reached in May, August, and mid-September.
According to the latest statements from Federal Reserve officials, the current interest rate levels continue to put pressure on the U.S. economy, and further rate cuts are not ruled out.
Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, stated that there are two meetings left for the Federal Reserve this year, and it is expected that they may reduce rates by a quarter of a percentage point at each meeting. Austan Goolsbee, President of the Federal Reserve Bank of Chicago, and Raphael Bostic, President of the Federal Reserve Bank of Atlanta, also believe that there is room for further rate cuts.
The initiation of an interest rate cut cycle by the Federal Reserve is likely to provide favorable support for the continuous rise in gold prices.
Ryan McIntyre, Managing Partner at precious metals investment company Sprott, points out that U.S. government debt is the biggest issue facing the economy, with public debt interest reaching historic highs exceeding $1 trillion.
McIntyre emphasizes that the last thing the Federal Reserve wants to see is an economic recession, as it could lead to a collapse of national debt. Given the Federal Reserve’s judgment of a weakening economic performance and the initiation of an interest rate cut cycle, it is considered the opportune time for gold investment as a hedge to protect funds.
Based on four reasons for investing in gold compiled by CBS News, it is evident that gold prices may continue to rise in the future.
1. Economic uncertainties persist, and gold, as a typical safe-haven asset, helps reduce overall investment risks during unstable economic periods. Ongoing conflicts in the Middle East and Ukraine, persistent inflation concerns, a slowdown in the labor market, and a decline in consumer confidence could potentially drive gold prices higher.
2. Central banks worldwide are buying gold. An increasing number of central banks are boosting their gold reserves, and this trend of central banks purchasing gold is expected to continue, providing sustained support for gold prices. Currently, Russia, China, India, and Turkey are major gold-buying countries.
3. Rising technical demand. Gold, with its conductivity and corrosion resistance, finds applications in the electronics industry for products like smartphones and computers, as well as in emerging technologies in renewable energy and the medical field. The development of these technologies may create continued demand for gold, thereby driving prices higher.
4. Gold is a finite resource. The supply side of the gold market also offers price support. In recent years, gold mine production has remained relatively stable, with limited new sources, high costs of developing new mines, and long delivery cycles indicating that gold supply is unlikely to significantly increase in the short term. As long as demand for gold continues to outpace supply, prices will continue to rise.
(This article is for general information purposes only and does not constitute any recommendations. The Epoch Times does not provide investment, tax, legal, financial planning, real estate planning, or other personal finance advice. For specific investment matters, please consult your financial advisor. The Epoch Times does not assume any investment responsibility.)