Gold Hits Record High as Traders Bet on Fed Rate Cuts


Last updated: October 15, 2024

Gold barsGold prices soared to a new record, with spot bullion reaching $2,469.66 an ounce, surpassing the previous peak set in May.

This surge comes amid signs of slowing inflation in the US, fueling speculation that the Federal Reserve will soon lower interest rates. Historically, high rates are unfavorable for gold, which bears no interest, yet the metal has risen nearly 20% this year.

This impressive rally is bolstered by significant purchases from central banks, strong consumer demand in China, and increased interest in haven assets due to geopolitical tensions.

Additionally, recent gains in exchange-traded fund (ETF) holdings are contributing to gold’s upward momentum.

“Optimism about US interest rate cuts, supported by more economic data pointing to a Fed pivot, is driving gold,” said Ewa Manthey, a commodities strategist at ING Bank NV. “Gold is likely to maintain its positive momentum given the current global geopolitical and macroeconomic landscape, with central bank demand expected to grow.”

On Monday, Fed Chair Jerome Powell stated that recent data has given policymakers greater confidence that inflation is heading towards the central bank’s 2% target.

Traders now anticipate two quarter-point rate cuts this year, with some even betting on three cuts after Goldman Sachs Group Inc. indicated conditions were ripe for easing, suggesting a solid rationale for rate reductions as early as July.

Gold’s ascent isn’t entirely unexpected. In June, consultancy Metals Focus forecasted a new record for the year, while Citigroup Inc. recently projected a base case for gold prices in 2025 to be between $2,700 and $3,000 an ounce.

Adding to market dynamics, investors are weighing the potential return of Trump to the White House, as his candidacy gains traction following a failed assassination attempt and the dismissal of a criminal case against him. According to David Higgins, head of trading at Merrion Gold, a Trump presidency could spur retail gold purchases due to perceived instability associated with his leadership.

As of 4:31 p.m. in New York, spot gold was up 1.9% at $2,467.58 an ounce. Meanwhile, the Bloomberg Dollar Spot Index remained steady, and US 10-year Treasury yields fell. Silver, palladium, and platinum also saw gains. The business implications of these trends are significant, affecting a wide range of market sectors.

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