Commodities: "Interest rate cut fantasies support gold price"

The fact that the US Federal Reserve is now also embarking on the path of interest rate cuts is catapulting the price of gold to ever new heights. Gold ETCs are more popular than they have been for a long time. The oil price, on the other hand, has fallen.
 

29 August 2024. FRANKFURT (Börse Frankfurt). Always new highs - the gold rally continues in August. This week, the price of a troy ounce has already reached a new all-time high of USD 2,531. On Thursday morning, it was barely lower at 2,519 US dollars. This represents an increase of 22 percent since the beginning of the year. “Gold is therefore showing one of the best performances of all asset classes this year,” comments commodities analyst Carsten Fritsch from Commerzbank.

An important reason for the upward trend is the interest rate turnaround in the USA, with the first interest rate cut in September now considered a foregone conclusion. This makes interest-free gold more attractive. The price of silver has also made significant gains recently. However, the high from May has not yet been reached again, nor have the highs from 2011.

Although Commerzbank has raised its price forecast for gold from USD 2,300 to USD 2,500 by the end of the year, it does not see any further upside potential for the time being. “As the market has already priced in Fed interest rate cuts of around 100 basis points by the end of the year, not much additional impetus can be expected from this side,” says Fritsch. However, the bank expects gold to reach USD 2,600 in the first half of 2025, but only USD 2,550 again by the end of 2025.

Gold as a hedge against financial market risks

Precious metal ETCs have been doing really well again since May. Issuer WisdomTree has also reported high inflows for the past four weeks. The mini-crash at the beginning of August also plays a role. “The precious metal continues to live up to its reputation as a hedge against financial market risks,” comments Mobeen Tahir from WisdomTree. “Gold was able to decouple quickly and recovered earlier than equities, oil and other risk assets.” The latest net inflows also showed a turnaround in sentiment.

ETC trader Ivo Orlemann from ICF Bank is seeing repeated interest in gold ETCs such as WisdomTree Physical Gold (<DE000A0N62G0>) or Invesco Physical Gold (IE00B579F325). At Lang & Schwarz, the focus is mostly on Xetra-Gold (DE000A0S9GB0). “However, many silver ETCs (JE00B1VS3333) are now also being bought,” reports Andreas Schröer.

On Xetra, there is currently a lot of turnover in Xetra-Gold and other gold and silver ETCs, such as those from Invesco, WisdomTree, iShares and Xtrackers. Xetra-Gold holdings have risen slightly again to 176.7 tons. However, it was still 199 tons at the end of 2023 and 231 tons at the end of 2022.