The start of a Federal Reserve rate-cutting cycle often coincides with a rally for gold, but investors might be surprised to find out that the upward move has already been going on all year. Spot gold enters Wednesday up nearly 25% in 2024, outpacing the S & P 500 and Nasdaq Composite . The Fed is widely expected to lower its benchmark interest rate later in the afternoon, though the market is still split on how big the reduction will be.
XAU= YTD mountain Gold is outperforming the major U.S. stock index year to date.
Typically, gold moves opposite of interest rates. The idea is that the yellow metal, which throws off no cash, is less attractive when even safe U.S.
Treasurys are offering investors healthy yields. After the start of the Fed's last non-pandemic rate-cutting cycle on July 31, 2019, spot gold rose 6% between the first cut and the end of the year. Gold's 2024 move so far raises the question of whether the rate-cut rally is already priced in.
Gold is already near the top of the 2024 range of outcomes projected by BlackRock Investment Institute, for example. But the optimistic case for gold is that there's been a "structural change" in demand for the yellow metal and that falling rates should bring in additional buying, said Robert Minter, director of investment strategy on the ETF team at Abrdn. Central bank buying The crux of the argument for gold is that the rally so far has largely been fueled by global central banks and other entities, like sovereign wealth fun.