Top Stories This Week: Gold Breaks US$2,600, Here's What Experts Think is Next

Gold hit yet another price milestone this week, closing Friday (September 20) at US$2,622.12 per ounce.

The latest increase came two days after the US Federal Reserve cut interest rates by 50 basis points.

The long-awaited reduction is the first since 2020, and places the target federal funds rate at 4.75 to 5 percent. Aside from its emergency cuts during the pandemic, the Fed hasn't lowered rates by half a percentage point since 2008.

After taking rates down to near zero during COVID, the Fed embarked on an aggressive hiking cycle in March 2022, reaching the 5.25 to 5.5 percent range last July. Since then, market participants have been closely tracking comments from Fed Chair Jerome Powell to try to glean insight on when the downward cycle would begin.

At the beginning of the year, many experts thought the Fed's first cut was likely to be a strong catalyst for gold — it's no secret that the yellow metal tends to perform well when rates are low and face pressure when rates are high.

But instead, gold embarked on a record-setting price run ahead of any Fed action, raising questions about what the cut would actually end up meaning. With that in mind, the Investing News Network asked Brien Lundin of Gold Newsletter what's next for gold now that rates are on the way down. Here's how he explained it:

"Going forward I think that what's going to happen is the markets are going to price in — gold specifically — continued rate cuts, and try to reach out there and feel ahead to whatever the Fed seems to be seeing now that it's being so aggressive in its rate cuts.

So I don't think this is the end of this move in gold — I think it's going to continue, because the baseline of factors like real interest rates are going to be falling very quickly from this point forward."

Lundin also touched on the cost of servicing the debt in the US, saying it's untenable even with rates on the way down. Chris Blasi of Neptune Global shared a similar perspective, noting that this is a key reason gold will keep rising.

"You have to step back and see what's — in my opinion — really happening in the big picture," he said.

"The economy can't go back — we're stuck with this massive unrelenting debt creation to keep the whole thing propped up," Blasi continued. "I think big picture — and it's proven — we've got the rate cuts and rate hikes over (the last) 24 years, and at the end of the day despite some short-term moves, gold keeps moving up."

Wrapping up on the Fed, it shared its latest dot plot after this week's meeting, showing where each official thinks the federal funds rate is headed. The document indicates that currently 50 more basis points worth of cuts are expected this year, with another full percentage point anticipated in 2025 and half a percentage point on deck for 2026.

The Fed has two more meetings in 2024, one in November and one in December.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.