Analysts at both Citi and HSBC assessed how commodities performed historically when the U.S. Federal Reserve cuts rates.
The U.S. Federal Reserve cut its benchmark interest rate on Wednesday and more reductions are expected in the coming months. Analysts at both Citi and
have taken the opportunity to do deep dives into how commodities are likely to perform looking ahead. Citi said in a fourth-quarter outlook report that the U.S. and global cutting rate cycles are set to "move into full swing" by the year end and should prove "very bullish" for precious metals, as real rates decline and growth concerns remain elevated.
in a Sept. 17 report examined the relationship between Fed rate cuts and copper and aluminum prices over the past 30 years. "We expect metal prices to follow the path as in 2019 when rate cuts were launched as a mid-cycle adjustment to prevent a further economic slowdown," analysts said. They added that this means both metals are likely to stay "range bound" during this rate-cut cycle and rally when demand picks up. "If a recession took place, rate cuts would be faster and larger than expected. We think metal prices would likely follow the path seen in the dot-com bubble in 2000-2003," they said.
said that's likely to be the same in a similar scenario now – with a potential drop in prices of about 20%. The bank did, however, stress that there are other factors, such as supply and demand, that come into play. Nevertheless, against the current backdrop, it says it prefers aluminum based on tight supply. In its base case, Citi sees copper prices averaging $9,000 per ton for the rest of this year, citing U.S. election uncertainty and weak manufacturing sentiment.
Copper (Mar'23) Silver / US Dollar Spot Gold / US Dollar Spot Silver COMEX (Mar'23) ICE Brent Crude (Apr'23) Citi Trends Inc United States Business News
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