The U.S Fed lowered the Fed Funds rate - the base interest rate in America - by 0.5%, or 50 basis points, last week. Markets were expecting a smaller 0.25% rate cut, so this was a surprising big first cut - only 9 out of 113 economists in a Bloomberg poll expected a cut of this size.

Market pundits have noted that reasons for a larger than expected rate cut could be because inflation was seen at 2.25% as of August (the Fed’s target is 2%), and recent labour market data showed a cooling jobs environment (jobs growth has slowed) - both signs that risks to higher inflation could be coming down.

In the East, China has shown that they’re serious about reaching their 5% GDP target in 2024 by introducing a broad package of monetary stimulus packages. This stems from disappointing growth data in recent quarters and pedestrian returns in their equities market and stumbling property market. The PBoC will pump at least US$113 billion of Yuan into the stock market by allowing funds and brokers to tap funds from the central bank to buy stocks. China now starting to look a lot like America...

Also - Troygold, that gold fintech at the bottom tip of Africa has launched their Daily Savings gold subscription, which allows you to link your debit or credit card to a gold subscription for daily gold purchasing in micro amounts. So, whenever you’re swiping your card at Woolies or Plato for that daily coffee, know that you should probably be putting that same amount toward gold on autopilot... you’ll end up with a golden treasure chest in a few years.

Gold has been on a tear since the Covid lockdowns, when U.S interest rates went from near zero to over 5%, and the gold price rose from $1,800/oz to $2,500/oz. But in 2024 alone, the Dollar has lost over 30% of its value to bullion. Think about that - in 9 months, people holding Dollars over Gold have lost a third of their purchasing value.

And in the last week, the expectation of a weaker U.S Dollar stemming from the 0.5% start of the rate cut cycle, spurred demand for anti-fiat currency assets and gold was seen setting yet a new record high of $2,687.30/oz.

Our take is that gold has entered a new realm of pricing, because it has become a barometer the fiscal and monetary policy outlook in the world - effectively a measure for the stimulus and debt-based globs of money being pumped into global markets by central bankers and their friends in oval offices. Gold is a proper macro asset now, and the Dollar will be facing serious headwinds.

We believe gold can gain further ground as central banks around the world follow the Fed’s lead in cutting interest rates. We also believe that insolvent governments will continue to print many zeros of fiat currency in the decades to come, and therefore that the West’s consumer demand for gold investment will catch up with that of Asia and India’s. But more on this next week...

The gold price was last seen trading at $2,661/oz.