Over $50 bps rate cut to cause panic; gold may surge to $3,000: Santosh Rao
Santosh Rao, Head of Research, Manhattan Venture Partners, says more than 50 basis points rate cut by Fed would cause panic. It means the economy is deteriorating and they do not want that to happen. As long as they keep cutting rates, 25 bps, gold will be steady. But if they cut a lot, gold will go spike much higher. $3000 is in the bag at that point.
What do you make of gold at $2,500? We understand that investors are looking at the Fed's rate cut decision to major escalations in the Middle East and the Russia-Ukraine conflict, but to what extent do geopolitical tensions drive these prices, and for how long will gold remain at these elevated levels?
Santosh Rao: There is a fundamental shift in the way investors are looking at gold. It was a safe-haven trade in the past, but now it has become a big part of a diversified portfolio. It does move with the stock market, but not one-to-one correlation. When the stock market fell recently in the US, gold fell as well, but not as much. So, it outperformed the broader indexes.
In a way, it is still a hedge, it is still a safe haven, but there is more than that going on. And your introductory commentary did mention that. Geopolitical tension has a play in that, but that can be temporary, it comes and goes, so that plays into the safe-haven place. But the bigger thing is the talk of interest rate cuts and the dollar weakening that always helps the gold price.
Those are some of the fundamental things and the central banks, in order to move away from total reliance on
