We now expect the Fed to start cutting interest rates at the end of this month. However, we only expect a quarter-point reduction in July and only one further cut this year. While lower US interest rates are typically good news for all commodities, there is a particularly close inverse relationship with precious metals. As such, it is perhaps not so surprising that the prices of gold and silver surged yesterday on the back of dovish comments from Fed officials. That said, we think that markets are factoring in too much Fed easing, which suggests that the prices of gold and silver could ease back a little later this year.
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