Key Points
- Following the Fed rate cut, gold and Bitcoin prices have reached new record highs.
- Gold investments are on the rise due to geopolitical risks, with Goldman Sachs predicting further price surges.
The price of gold has recently been reaching new highs, following a similar trajectory to Bitcoin. In the past week, Bitcoin’s price has seen an increase of over 8.5%, reaching a value of $64,000.
Meanwhile, the price of gold reached a record high of $2,629 per ounce on September 23. This represents a significant 5% gain in the last 15 days. The increase is largely attributed to the 50 basis points rate cut implemented by the Federal Reserve.
Effects of Interest Rate Cuts
A decrease in interest rates often reduces the appeal of assets tied to Fed-determined returns, such as short-term government bonds. This makes inflation hedges like gold a more attractive investment option.
There has been a growing interest in gold investments recently, due to rising geopolitical risks. These include the ongoing conflicts between Russia and Ukraine, as well as Israel and Hamas. The uncertainty surrounding the 2024 US elections also plays a role.
Gold’s Future Prospects
Goldman Sachs recently reported that gold purchases by central banks have tripled in the past two years due to the Russia-Ukraine conflict. The banking giant’s researchers predict that the gold price will surge to $2,700 by early next year, given the expectation of more Fed rate cuts.
Peter Boockvar, chief investment officer at Bleakley Financial Group, noted that gold has yet to surpass its inflation-adjusted peak of $3,200, set in 1980. Meanwhile, Bitcoin is also showing strength and is expected to rally in Q4 2024. Markus Thielen, 10x Research founder and CEO, noted that the chances of a major breakout increase as we approach the October-to-March period.
