The Summer of Rate Cuts Has Begun. What Does That Mean For Precious Metal Prices?

ECB Cuts Interest Rates, Bucking Tradition

Following months of speculation, one of the “Big Three Central Banks” has finally cut interest rates and surprisingly, it’s not the Federal Reserve that’s making the first move.

A normal day for markets became something extraordinary after the European Central Bank cut interest rates on Thursday and in the process reversed a 25-year precedent. Since its founding in 1999 – the ECB has never cut interest rates before the US Federal Reserve and the Bank of England.

And let’s not underplay it. The ECB’s break away from its long-standing tradition of historically being the last to move to the first – could potentially mark the beginning of a ‘new era’ for macro traders.

The ECB’s move is also really surprising, especially when you consider that a string of recent data shows inflation is still running hotter in the European economy – compared to the U.S and other G7 countries. That in itself, chips away at any logical justification for the ECB to cut rates first.

The big question is: Will the Federal Reserve be next to cut interest rates in 2024?

Commodities on the Cusp: FOMC Meeting to Set Stage for Gold and Silver Surge

The answer to that question may come from the hotly anticipated FOMC Monetary Policy Meeting on June 11-12.

Traders will be closely watching Federal Reserve Chair Jerome Powell’s press conference after next week’s rate-setting meeting for clues on the U.S central banks next interest rate decision.

While FOMC officials are widely expected to hold interest rates steady again this month – it would only take a few key words at his press conference for Jerome Powell to give traders optimism that rate cuts are on the way this year. That could ultimately set the stage for Gold and Silvers next big move.

In a note to clients, analysts at GSC Commodity Intelligence reiterated that “2024 Is The Year of The Metals” – doubling down on their view that “any substantial pullbacks should be viewed as buying opportunities because Gold and Silver prices won’t stay low for long”.

According to analysts at GSC Commodity Intelligence – Gold prices remain well supported above the key psychological level of $2,300 an ounce, which suggests that there’s still plenty of upside ahead.

Elsewhere, now Silver’s stealth bull run has come out of hiding after prices surged above $32.50 an ounce for the first time in 12-years – the precious metal could be destining for greater upside.

To quote GSC Commodity Intelligence – “Silver prices trading between a range of $37.50 to $50 an ounce may become a real possibility this year. However, that forecast may prove to be conservative, if Gold prices continue to scale new highs in the coming weeks and months ahead”.

That’s welcoming news for the bulls, but painful for anyone sitting on the sidelines, who must now decide how much FOMO they can handle.