US Fed Rate Cuts: JPMorgan, Goldman Sachs Eye 25 bps; Will Gold & Bitcoin Fall?

US Fed rate cuts is a key focus among investors in global stock and crypto markets this week as they seek additional cues for market direction. JPMorgan and Goldman Sachs eye a modest 25 bps rate cut by the US Federal Reserve as markets look for 50 bps rate cuts due to elections. Will Bitcoin and gold price fall or consolidate after the interest rate cut on September 18?

Wall Street Remains Divided on 25 bps and 50 Bps Fed Rate Cuts

Some Wall Street giants expect an aggressive 50 bps rate cut by the US Fed while some such as investment bank Goldman Sachs and JPMorgan expect 25 bps. Interestingly, JPMorgan Global Research Chair Joyce Chang expects a 50 bps rate cut, and JPMorgan CEO Jamie Dimon still warns about recession and inflation. Recently, JPMorgan dismissed bull market speculations after Fed rate cuts.

Goldman Sachs anticipates a minor, near-term setback for gold if the Federal Reserve opts for just a 25 bps cut this week, reported Bloomberg on Sep. 17.  “Fed rate cuts are poised to bring Western capital back into gold ETFs, a component largely absent of the sharp gold rally observed in the last two years,” analysts Lina Thomas and Daan Struyven said in a note to clients.

Goldman sees a boost in capital flows to gold ETF and gold prices gradually in months after the setback. The investment bank expects a more modest 25 bps Fed rate cut. Gold price has rallied massively this year, but Bitcoin price has also rallied nearly 35% YTD.

Meanwhile, JPMorgan advocated for a 50 bps Fed rate cut on Wednesday, with easing a total of 100 bps rates this year. JPMorgan Global Research Chair Joyce Chang expects a 50 bps rate cut.

However, David Kelly, chief global strategist at JPMorgan Chase, said the biggest risks facing the economy and the market are the Fed’s aggressive actions or Chair Jerome Powell speaking negatively. He predicts that the Federal Reserve will cut interest rates by 25 instead of 50 bps.

A 50 bps Fed rate cut will drive massive activity in the markets, increasing volatility. According to CME FedWatch tool, there’s a 69% probability of a 50 bps rate cut and 31% odds of a 25 bps in after the FOMC meeting. Also, the data indicates a total of 125 bps Fed rate cuts this year. This may trigger a massive Bitcoin price rally, but with volatility.

Bitcoin Price May Become Unstable

Bitcoin is trading sideways near $59,000 amid the FOMC meeting, as predicted by CoinGape. A 50 bps rate cut will boost sentiment, but price momentum will remain volatile. Meanwhile, the Israel-Hamas war has raised concerns over the resilience of upside momentum in for the top crypto.

BTC price is currently trading at $59,086. The 24-hour low and high are $57,501 and $59,254, respectively. Furthermore, the trading volume has increased by 15% in the last 24 hours.

The rate cut decision on September 18 could trigger a risk-on scenario, pushing BTC price higher, or a risk-off outlook, leading to panic selling. BTC price forecast looks at market direction as Tether mints $1 billion USDT ahead of Fed rate cuts.

Crypto analyst Ali Martinez said “In the lower timeframes, the TD Sequential flashes a sell signal for Bitcoin while both the RSI and Stochastic RSI show oversold conditions. A potential correction looms unless can sustain a candlestick close above $58,800.”