Heraeus analysts used developments in the gold market in 1984, a year after the Fed cut interest rates for the first time after a bullish cycle, to explain the current developments. During that year, gold was 10% higher than the day the interest rate cut was decided. 2 years later, gold has increased more than 18%. The USD tends to weaken, US Treasury bond interest rates decrease and the economy tends to worsen. All of these factors could play a role in supporting gold prices.
They admit that gold's short-term outlook is challenged by rising yields. “The average rate tightening cycle usually lasts for 21 months with a total increase of 3.02%, but this time is clearly over,” these analysts wrote. Historically, long-term yields peak just before the Fed stops raising short-term interest rates.” Heraeus experts also emphasized that, after 10-year Treasury yields peaked, it was only a matter of time before Fed Chairman Jerome Powell started cutting interest rates.
They admit that gold's short-term outlook is challenged by rising yields. “The average rate tightening cycle usually lasts for 21 months with a total increase of 3.02%, but this time is clearly over,” these analysts wrote. Historically, long-term yields peak just before the Fed stops raising short-term interest rates.” Heraeus experts also emphasized that, after 10-year Treasury yields peaked, it was only a matter of time before Fed Chairman Jerome Powell started cutting interest rates.
