Gold prices are anticipating the Federal Reserve’s first interest rate cut this year but the historic move has gotten out of hand, according to Barclays. The precious metal has rallied about 7% over the past month, a move that has been surpassed only 6% of the time over the past decade, analysts led by Stefano Pascale told clients in a note released Tuesday. Gold rose for nine consecutive trading sessions — a near record run — according to the analysts. The shiny metal also moved more than two standard deviations in back-to-back daily runs on March 4, something that has happened only 16 other times going all the way back to January 1975, according to Barclays. The latest move higher was triggered by the Federal Reserve’s pivot toward a more dovish policy at the end of last year, when the central bank held rates steady and indicated cuts are likely coming in 2024, according to Barclays. Large funds that had bet against gold started short covering in the wake of the Fed pivot, while demand for gold from central banks remained high, providing tailwinds for the precious metal. “However, it appears the current rally in gold is premature as historically the yellow metal starts rising well after, rather than in anticipation to, the first Fed cut,” Pascale and his team told clients. With gold getting ahead of itself, in Barclays’ view, the British bank recommends that investors replace long delta positions with options to gain upside exposure, lock-in gains and limit downside risk.
