Gold prices are positive on Wednesday morning. Market volatility is expected this afternoon as the Federal Reserve’s Open Market Committee (FOMC) concludes its two-day meeting. The FOMC will release a statement, followed by a press conference with Fed Chairman Jerome Powell and the publication of the Fed’s “dot plots”. Market sentiment has shifted, now slightly favoring a 0.5% rate cut, compared to earlier expectations of a 0.25% reduction. This would mark the Fed’s first rate cut in 4.5 years. The unusual level of uncertainty surrounding the magnitude of the anticipated rate change could lead to significant market fluctuations across various sectors after the Fed’s statement is released at 2:00 p.m. EDT. The price of gold is trading at $2576.36, up $6.67. The price of silver is trading at $30.52, down 18 cents.
Goldman Sachs analysts predict that gold may experience a brief setback if the Federal Reserve implements a 25-basis-point rate cut today. However, Goldman anticipates a subsequent rally to a record high of $2,700 an ounce by early next year, driven by increasing flows into gold-backed exchange-traded funds (ETFs). The analysts expect a gradual boost to ETF holdings and gold prices as the Fed’s easing cycle progresses, noting that this upside is not yet fully priced in.
Despite gold’s strong performance this year, surging by about a quarter and hitting successive records, global holdings in bullion-backed ETFs remain lower year-to-date and significantly below the peak set during the pandemic in 2020. Goldman Sachs analysts believe that as ETFs are backed by bullion, inflows will reduce the physical supply of gold available to the market, further supporting price increases. Currently, spot gold is trading near $2,585 an ounce, while silver is approaching $31 an ounce and on track for its longest run of gains since 2019.
