The Federal Reserve hiked interest rates from zero to between 5.25 and 5.5% post-Covid in an effort to quell spiking inflation. With the world locked down in their homes, and production effectively stalled, global governments and their central banks ran their money printing presses on overdrive, in order to prop up asset prices and prevent a financial market collapse. The result was massive inflation in producer and consumer goods, which the Fed attempted to contain with an aggressive rate hike cycle.

To put this into context, the rate increase of over 5% from a 0% base, was the steepest rate hike in percentage terms in U.S history, and the scale of U.S. Dollar printing after Covid was such that more than half of all U.S Dollars in existence was created since then.

Fast forward almost five years, when inflation has been trending down but still above the Fed’s desired 2% target, at over 3%, and with a combination of high unemployment, and poor manufacturing output and corporate earnings data this quarter, markets are starting to expect rate cuts in Q3 and Q4 this year. When rates go down, the Dollar usually weakens, and that’s good for gold.

This week’s grand move in the USD gold price to as high as $2,531.75/oz, which is the highest-ever Dollar price, was the result of current positive momentum by traders. Markets drove the press up on forecasts for what U.S Fed Chair Jerome Powell would say at this Friday’s Jackson Hole Symposium - an annual meeting of global central bank governors that takes place in Wyoming, America.

Bond markets were seen pricing in a 113% chance of a September rate cut, and traders expect Powell to announce his intentions for one or two rate cuts this year. As a result, gold’s momentum drove it through a new high, and of particular importance, through the $2,475/oz previous resistance level. A bullish sign for the yellow metal going forward.

In a Bloomberg article published on 20th August, author Jack Wittels quotes two pundits stating:

“We expect the gold price to continue to rise in the first half of 2025 due to further Fed interest rate cuts, a US inflation rate that remains above target and a weaker US dollar,” Commerzbank AG commodity analyst Carsten Fritsch wrote in a report, and UBS Global Wealth Management’s Wayne Gordon is also bullish about the yellow metal’s prospects, saying prices are heading toward $2,700 an ounce by around the middle of next year.

The Rand Gold Price was also seen trading at near record highs of R46,000/oz having returned close to 18% this year, even as the Rand strengthened against the Dollar amidst GNU political euphoria - the Rand has come down from over R19 to the Dollar at the start of the year, to around 17.87 today.

With the announcement today that consumer price inflation has dropped to 4.6% in July year-over-year, the lowest rate of price increases in three years, global banks like Goldman Sachs have made statements that indicate rate cuts coming from the SARB in September as well.

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