Gold Prices Soar as Federal Reserve Rate Cuts Loom
Gold has been on a remarkable upward trajectory recently, driven by expectations that the Federal Reserve will soon begin cutting interest rates. The commodity’s surge has caught the attention of economist Peter Schiff, a well-known advocate for gold, who commented on the market’s move in a recent post on social media platform X.
On Friday, spot gold settled at $2,070.90 per troy ounce after reaching an intraday high of $2,075.34. Meanwhile, gold futures for December delivery rose by 1.72% before closing at $2,073.20. Year-to-date, spot gold and gold futures have rallied by approximately 13.5%, compared to the S&P 500 Index’s gain of about 19.67%.
Schiff noted that despite gold’s $35 increase on Friday and its record close, gold mining stocks rose by a more modest percentage than gold itself. This, according to Schiff, suggests “extreme bearishness” in the market. He added that gold stocks still need to rise by 12% to reach a 52-week high.
The Federal Reserve’s decision to raise interest rates earlier this year was aimed at curbing inflation caused by the government and central bank’s stimulus measures following the COVID-19 pandemic. However, with inflation cooling off, market participants now expect the central bank to reverse its rate hikes. This reversal would result in a weakened dollar and, consequently, stronger gold prices. Gold and the dollar have an inverse relationship since gold is denominated in dollars.
The VanEck Gold Miners ETF (GDX), which tracks the performance of gold miners, has gained about 11% this year, underperforming spot gold and gold futures. However, as gold prices continue to rise, gold mining stocks are expected to catch up, benefiting from higher realized prices and boosting their top-line.
Benzinga has identified several gold stocks that meet specific screening criteria, including Agnico Eagle Mines Limited (AEM), B2Gold Corp. (BTG), Franco-Nevada Corporation (FNV), Newmont Corporation (NEM), and NovaGold Resources Inc. (NG). These stocks have a market capitalization of over $300 million, average trading volume greater than 500,000, analysts’ recommendation of “Buy” or greater, and an average analysts’ price target that is 20% above the current price.
The VanEck Gold Miners ETF closed at $31.81 on Friday, representing a 1.56% increase, according to Benzinga Pro data.
As gold prices continue to surge and expectations of Federal Reserve rate cuts grow, investors are closely watching the precious metal market. Gold’s resilience and its potential for further gains make it an attractive investment option in the current economic climate.
Please note: This article is for informational purposes only and should not be construed as investment advice. Always do your own research and consult with a qualified financial advisor before making any investment decisions.
