Copper And Gold To Get Immediate Boost From Lower Rates: Goldman Sachs

Yolowire 21-Feb-2024 9:42 AM

U.S. investment bank %GoldmanSachs (NYSE:GS) says that %Copper and %Gold prices will see a large and immediate increase when the U.S. Federal Reserve lowers interest rates later this year.

The immediate price boost from a Fed driven 100 basis point decline in U.S. two-year rates is the largest for metals, especially copper (6%), and then gold (3%), followed by oil (3%), wrote Goldman Sachs in a note to clients.

The bullish forecast comes as copper prices are trading at a three-week high of $8,548 U.S. per metric ton on the London Metals Exchange.

Spot gold prices are at a two-week high of $2,030.30 U.S. per ounce currently.

While Goldman Sachs expects lower interest rates to boost metal and oil prices, the bank sees no significant impact on the price of natural gas or agricultural commodities.

Goldmans commodities team says that seasonal inventory cycles and weather will outweigh any impact that rate cuts may have on agriculture products such as wheat and soybeans.

The positive impact of lower interest rates on both commodity demand and supply makes the commodity price impact ambiguous, said the bank in its outlook.

The American central bank is expected to cut its leading interest rate in June of this, depending on the performance of both inflation and the U.S. economy.

Futures traders had expected the first U.S. rate cut in March but have pushed that forecast out to June after a hotter-than-expected inflation report for January and as the U.S. economy continues to show resiliency in the wake of higher interest rates.

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