Yesterday saw one of the year’s big fiscal events, and as expected the results were dramatic, pushing gold briefly above $2,600 per ounce for the first time.
Markets were split going into the Federal Reserve's latest interest rate meeting, with half expecting a smaller 25 basis point cut, and the other half expecting a larger 50 basis point cut. The Federal Reserve opted for the larger of the two, surprising some with the aggressive start to cuts after holding steady for so long.
The result was a dramatic spike in the price of gold and silver. Gold jumped from $2,570 to a new all-time high of $2,600.81 in just over 30 minutes, before pulling sharply back to $2,547.74 an hour and half later. Silver jumped to $31.32, and then collapsed to $29.77, but has since recovered almost all of the losses.
Gold has also recovered some of the losses from yesterday and is trading back above $2,580 at the time of writing. Gold looks to have some further gains left in it given the 50 basis point cut is certainly to the metal’s favour, and the US dollar is showing further weakness this morning as markets react to the cut. The Fed are also expected to make further cuts now this year, and the CME Fed Watch tool shows another 100% chance for a further cut at the next meeting on November 7th.
The Bank of England left UK interest rates unchanged at today's meeting. This has helped propel the pound to a 2.5 year high, and leaves gold in GBP around the £1,950 per ounce level of recent weeks.
Events in the Middle East also look to be escalating once more, with Israel believed to be behind a spate of explosive electronic devices that have rocked Lebanon two days in a row. With Israel’s Defence Minister announcing a “new phase” in the war, there is the potential for further safe haven buying in gold.
Yesterday marked the start of a key period for precious metals, and with the US election on Nov 5th, and the Fed now expected to cut again on the 7th, there will be further volatility to come in the weeks ahead, and $2,600 could soon be breached yet again.
