Even if the Federal Reserve cuts interest rates, will the price of gold not rise?

Sunshine Profits CEO Przemysław Radomski stated that the peak prices of gold and silver may have already appeared, even if the Fed cuts rates in September, prices may stagnate or fall.

In his recent analysis, Radomski pointed out that while it is generally believed that the price of gold will rise after the Fed initiates a rate cut cycle, the reality may not be so simple. He explained that what truly affects gold is real interest rates, and market participants' expectations of rate cuts are also crucial. Currently, the market has already anticipated the Fed's rate cut, so any price changes based on rate cuts may have already occurred.

According to the CME FedWatch Tool, the market believes there is a 93% chance that the Fed will keep rates unchanged this week, but a 100% probability of a rate cut in September, with most people also expecting further cuts in November and December. He stated that if the Fed fails to achieve 3 rate cuts this year, it may be seen as a "hawkish surprise."

Although gold prices rose when the Fed cut rates in 2007, Radomski cautioned that there are also examples of gold prices plummeting after rate cuts in 2008. He reviewed the historical reactions of gold prices to the Fed's first rate cut, noting that there were more cases of price declines than increases. Especially after the rate cut in October 2008, both gold prices and gold mining stocks experienced significant declines.

Radomski mentioned that the situation in 2020 is also interesting, with gold prices rapidly rising and then sharply falling, and gold mining stocks showing even more pronounced performance. He emphasized that rate cuts may not necessarily drive the rise of gold, silver, or gold mining stocks, and could also have no effect or lead to declines in these assets.

Radomski also analyzed the brief rebound in gold prices last Wednesday, stating that this intraday rebound cannot offset the bearish implications of the previous weekly trend reversal, and that gold prices have broken below the upward support line.

Radomski said, "This collapse has not been confirmed, so it is still too early to say its impact is very pessimistic, but it has already well confirmed that all the technical indicators I described earlier are working."

He warned investors to be prepared for a decline in gold prices, noting that silver prices have also sharply declined, and GDXJ (representing junior gold mining stocks ETF) has reversed its early gains, falling by over 1%. Radomski believes that given the bearish outlook for gold and silver, gold mining stocks will naturally decline as well.

He cautioned, "I previously advised you to fasten your seat belts, and if you are not prepared for a decline yet, this is another reminder."