(Kitco News) - The gold market continues to hover near record highs, pushing toward $3,700 an ounce as investors brace for the Federal Reserve to restart its easing cycle. While lower rates are already priced in, one fund manager says the central bank could move more aggressively than markets expect.
In a recent interview with Kitco News, Robert Minter, Director of ETF Strategy at abrdn, said gold is on track to hit his year-end target of $3,700 an ounce, but the rally could accelerate if the Fed surprises with a 50-basis-point rate cut.
Although the odds of such a move remain slim — the CME FedWatch Tool pegs the chance at less than 5% — Minter noted that it wasn’t even considered a possibility just weeks ago.
Rising recession fears are adding to the uncertainty. Minter also highlighted mounting criticism of the Fed from President Donald Trump and his administration, saying the central bank risks appearing slow to respond to shifting economic conditions.
However, he argued this reflects a deeper flaw in how U.S. monetary policy relies on lagging data.
“Powell has made a lot of mistakes,” he said. “However, who wouldn’t have, faced with everything he has had to deal with over the years? He has faced problems that nobody has ever had to deal with, and right now he is trying to judge the state of the economy, looking at outdated economic data. It’s like trying to drive a car looking through the rearview mirror.”
Last week, revised data from the Bureau of Labor Statistics showed that earlier employment figures were overstated. Nearly one million jobs were cut from the record — triple the 10-year average and the largest downward revision on record.
Minter said these revisions, combined with rising unemployment claims and sluggish summer job growth, raise the risk of an outsized Fed move this week.
“The Federal Reserve has the opportunity to take a dramatic proactive step and cut interest rates by 50 basis points,” he said. “A 50 basis point cut is traditionally seen as a panic move, but they have an excuse with the data to make a bigger move, and they can come out and say that they are trying to get ahead of any recession threat.”
Even without a shock cut, Minter said the Fed could still send a powerful signal by projecting a prolonged easing cycle through 2026 in its updated economic outlook and dot plots. That, he added, could also drive gold above his target.
“There is no question that rates have to come down,” he said. “Two-year yields show that the Fed funds rate is 100 basis points too high.”
Minter is also bullish on silver, expecting the gray metal to follow gold higher on the back of solid industrial demand.
“I like silver because I like emerging market growth prospects and growing capex spending,” he said. “Emerging markets are investing in energy independence and security, and that will continue to drive demand for silver.”
