Positive Outlook for Gold Prices
Goldman Sachs has reaffirmed its positive outlook on gold, pointing to strong central bank demand and the anticipated interest rate cut from the U.S. Federal Reserve, expected at this week's policy meeting. Gold prices surged to a record high of $2,589.6 per ounce on Monday, driven by a weaker dollar and the likelihood of a significant rate cut by the Fed.
Analysts Lina Thomas and Daan Struyven of Goldman Sachs emphasized in a note that upcoming Fed rate cuts could attract Western capital back into gold ETFs, a market segment that has not been a major player in the gold rally of the last two years. The bank maintains its forecast that gold prices will reach $2,700 per ounce by early next year.
This year, gold has been among the top-performing commodities, climbing roughly 25% and repeatedly hitting new records. This rise has been fueled by increased central bank purchases and investor anticipation of the Fed's shift toward monetary easing.
While investors remain split on whether the U.S. central bank will kick off its easing cycle with a half-point rate cut or, as Goldman Sachs predicts, a more modest 25-basis-point cut, the outlook for gold remains strong.
Bitcoin: Limited Upside Potential
Although the Federal Reserve is considering a 50-basis-point rate cut, any move this week may not result in the liquidity boost many investors hope for. Bitcoin's performance following rate cuts has been inconsistent. For instance, after the 2019 rate cut, Bitcoin initially rose but then declined by 30% in the following months.
Recent data shows that Bitcoin has generally dropped by about 10% during the first week of the month, partly due to weaker macroeconomic indicators. Several signals suggest that the cryptocurrency's upside potential is limited, with short-term buying opportunities being mostly tactical. On-chain data indicates low activity, signaling a lack of substantial interest.
Even if Bitcoin experiences a rally following a Fed rate cut, it may be short-lived, as the 2019 comparison suggests. Given the weak on-chain data and low market momentum, any surge may not be sustainable. A rally could occur in Q4, but precise timing will be key. An unexpected event could, however, reignite market enthusiasm and restore investor confidence.
Remarks
While Bitcoin shares some intrinsic characteristics with traditional safe-haven assets, the market sentiment has not yet aligned with this view among the majority of Bitcoin traders. Until Bitcoin's value and its original purpose are more widely understood and accepted by the majority of active traders, it will continue to be treated as a risky asset, similar to stocks. Therefore, considering the outlook of the stock market can often provide a useful reference when analyzing the cryptocurrency market.
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10x research - Pay attention to this
Reuters - Goldman Sahcs reiterates bullish view on gold prices amid Fed rate-cut hopes
Bloomberg - Goldman Says Gold May Dip If Fed Opts for Quarter-Point Cut