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Writer's pictureBy The Financial District

Gold May Dip If Fed Opts For 25 bps Cut

Gold may face a minor, near-term setback if the Federal Reserve opts for a 25-basis-point (bps) cut this week.


Gold has been one of the strongest-performing major commodities this year, gaining about 25% and setting successive records.



However, the metal is expected to rally to a record high, supported by rising inflows into bullion-backed exchange-traded funds, according to Goldman Sachs Group Inc., as reported by Sybilla Gross for Bloomberg News.


"Fed rate cuts are poised to bring Western capital back into gold ETFs, a component largely absent from the sharp gold rally observed in the last two years," analysts Lina Thomas and Daan Struyven said in a note, reiterating the bank’s forecast for a surge to $2,700 an ounce by early next year.



The precious metal has been one of the strongest-performing major commodities this year, gaining about 25% and setting successive records as central banks increase purchases and traders anticipate the Fed's pivot to monetary easing.


Investors remain divided on whether the Fed will begin its easing cycle this week with a half-point reduction or — as Goldman Sachs predicts — a more modest 25-basis-point cut.






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