Copper, gold to get 'largest immediate' boost from Fed easing, Goldman says
Reuters
Published Feb 21, 2024 12:29AM ET
Updated Feb 21, 2024 01:20AM ET
(Reuters) - Copper and gold are expected to see the largest immediate price boost in the commodities sector from potential U.S. Federal Reserve interest rate cuts, analysts at Goldman Sachs said.
"The immediate price boost from a Fed driven 100 basis point decline in U.S. 2-year rates is the largest for metals, especially copper (6%), and then gold (3%), followed by oil (3%)," Goldman Sachs said in a note dated Feb. 20.
Three-month copper on the London Metal Exchange was trading near a three-week high of $8,548 per metric ton as of 0542 GMT on Wednesday, while spot gold was at a near two-week high at $2,030.30 per ounce. [MET/L] [GOL/]
The Wall Street bank, however, said it expects no significant price effects on natural gas or agricultural commodities as micro factors such as seasonal inventory cycles and weather outweigh any impact from rate cuts.
"The positive impact of lower interest rates on both commodity demand and supply makes the commodity price impact ambiguous in theory," Goldman said.
"In practice, we find that the demand boost to prices from a lower cost of carrying inventory and from higher GDP via easier financial conditions dominates."
The U.S. central bank is expected to cut the federal funds rate in June, according to a slim majority of economists polled by Reuters, who also said the greater risk was that the first rate cut would come later than forecast.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.