The main interest rate set by the US Federal Reserve has been lowered by 50 basis points (bps), to range between 4.75% and 5%. The Federal Reserve has not lowered rates since 2020.Concerns about the US economy’s slowing growth and decreasing inflation led to the decision. Although the goal of this action is to stabilize the US economy, concerns have been voiced about how it would affect other markets, particularly India.
Impact of US fed rate cut on Gold prices
The impact on gold prices, which are a popular investment in erratic economic times, is one important area that is being attentive monitored.Gold prices shot up, reaching as high as $2,600 per ounce (~Rs 73,750) after the Fed reduced rates.In the gold market, this is seen as a psychological threshold. Expectations of additional rate reduction and worries about the US economic outlook have fueled the price increase.The focus of the gold market has changed away from central bank purchases and Chinese investment demand.
The influence of interest rate decreases in Western economies, especially the US, on gold prices is currently the main topic of discussion. Gold is usually a better investment option than other assets in a low-rate environment since it does not earn interest. It makes it more appealing than other assets when interest rates are low.Rate reductions have the potential to boost gold prices, but past performance indicates that this is not necessarily the case.
