- Goldman Sachs sees gold falling slightly in the near term if the Federal Reserve decides to cut interest rates by just 25 basis points this week, but the yellow metal could later rally to record highs, supported by increased inflows into gold-backed exchange-traded funds, it expects.
- According to Bloomberg, analysts Lena Thomas and Dan Struyven noted in a note that “the Fed’s rate cuts are expected to bring back Western investment flows into gold ETFs, a factor that has been largely absent from the massive rally in gold prices over the past two years.”
- The note added that the bank still adheres to its expectations that gold prices will rise to $2,700 per ounce by the beginning of next year.
- “While we expect a slight pullback in gold prices amid economists’ expectations that the Fed will cut rates by 25 basis points on Wednesday, we also expect a gradual increase in ETF holdings, and thus higher gold prices in the long term, as the monetary easing cycle continues,” the analysts added.
- Despite the continued rise in gold prices, these holdings are still lower than they were at the beginning of the year, estimated at about 25% below the peak recorded during the Corona pandemic in 2020.
