Fed's large interest rate cut should boost gold demand - Citi

 The Federal Reserve's decision to aggressively cut interest rates last week should boost investor appetite for gold, according to analysts at Citi.

In a note to clients, the analysts reiterated their "bullish" stance on the metal, projecting a baseline average price of $2,800 to $3,000 per ounce in 2025.

Gold prices hit a record high in Asian trade on Monday thanks to persistent cheer over lower US interest rates as well as uncertainty before more economic cues this week.

The yellow metal had already peaked last week after the Fed slashed borrowing costs by 50 basis points and signaled the beginning of an easing cycle that analysts expect could bring rates down by as much as 125 basis points this year.

Lower rates bode well for gold, given that they reduce the opportunity cost of investing in non-yielding assets. A decrease in borrowing costs also reduces the appeal of the dollar and debt.

This week, a slew of Fed members, most notably Chair Jerome Powell, are set to speak. Elsewhere, the monthly personal consumption expenditures price index data -- one of the Fed’s preferred inflation gauges -- is also due on Friday, and is likely to factor into the central bank’s monetary policy plans.

Beyond the Fed, central bank meetings in Switzerland and Sweden are both expected to also yield interest rate cuts this week.

Meanwhile, among industrial metals, optimism over a drawdown in rates has also bolstered copper in recent sessions.

Traders were focused on more stimulus measures in top importer China, after the People’s Bank of China unexpectedly cut repo rates to further boost local liquidity.

"Copper could be a bullish catch-up trade if Fed cuts and China easing produce a soft landing and a rebound for the global manufacturing growth cycle. However, a surprise victory [for Republican presidential candidate Donald Trump] in the US elections could make the path volatile, on tariff implementation risks," the analysts at Citi said.