Analysts at Goldman Sachs are projecting potential interest rate cuts by the US Federal Reserve could immediately propel metals, particularly copper and gold.
“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 their February 20 note.
The analysts are also forecasting that rate cuts won’t have a substantial impact on natural gas or agricultural commodities. While they can boost demand by making borrowing cheaper, they can also potentially lower costs for producers, affecting supply and demand dynamics in complex ways.
“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.”
Economists polled in a recent Reuters survey expect the Fed to cut the federal funds rate in June.
Information for this story was found via Reuters, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
