Analysts from ANZ Bank stated that market expectations for a significant interest rate cut by the Federal Reserve this week are increasingly high, supporting gold prices. On Wednesday, September 18th, at noon in the Asian market, gold prices were at $2569 awaiting a decision. Analysts suggest that investors should pay attention to the overall trend of interest rates, whether it is a 25 basis point or 50 basis point rate cut this week, and there will be further interest rate cuts in 2025. Gold prices are expected to rise to $2900 by the end of next year.

Soni Kumari, a commodity strategist at ANZ Bank, and Daniel Hynes, a senior commodity strategist, stated in their latest gold report that with the Federal Reserve preparing to lower interest rates, gold prices breaking through the technical level of $2550 per ounce should continue to attract bullish investors' attention.

Analysts predict that gold prices will rise to $2900 per ounce by the end of 2025, driven by the recovery of investment demand, which was a disappointing support pillar in the first half of 2024.

(Source: Kitco)

In the upcoming easing cycle, the decline in real interest rates and the weakening of the US dollar may strengthen their inverse relationship with gold. As the opportunity cost of holding gold decreases, this will stimulate investment demand. We expect strategic investment in gold to recover and push up prices, "the analyst said.

At the time of these remarks, the market expects the Federal Reserve to significantly cut interest rates on Wednesday.

According to the Chicago Mercantile Exchange's (CME) Fed Watch tool, the market expects a 65% chance of a 50 basis point rate cut.

However, many analysts point out that these expectations may be too aggressive, with most economists predicting a 25 basis point rate cut and sending dovish signals that further cuts will be made by 2025.

Kumari and Heins emphasized that investors should focus on the overall trend of interest rates, rather than a single interest rate cut.

Analysts said, "A 100 basis point rate cut could lead to a net inflow of 200-250 tons of gold into exchange traded funds (ETFs) in the coming months. It is expected that a 200 basis point rate cut during this cycle could increase gold inflows by 500 tons.

In addition to the upcoming interest rate cut, ANZ Bank remains optimistic about gold as central banks continue to increase their investments in gold. Analysts say they do not expect the rise in gold prices to deter central banks from purchasing gold.

They said, "We have raised our expectations for central bank purchases to 950 tons in 2024 and 850 tons in 2025. These purchases are lower than the past two years, but still relatively high

However, ANZ Bank also warns investors that there may be some volatility in the gold market in the short term.

Although strategic investments in ETFs may be a structural driving factor in driving up gold prices, short positions seem too high, short positions are almost filled, and long positions are approaching 2020 levels. Crowded positions may create resistance to gold prices in the short term, "they explained.

Despite these short-term risks, strategists point out that gold still maintains a strong momentum.

As long as the price remains above $2550 per ounce, we expect the price to quickly rise to the range of $2640-2650 per ounce. However, if the price falls below $2540 per ounce, it indicates that this breakthrough is a wrong signal. In this case, technical selling may occur in the wave of profit taking after the recent price rise, and the price may fall back to the next support level of $2460 per ounce, "the analyst concluded.