Gold prices surged to new record highs on Tuesday, driven by strong expectations of U.S. interest-rate cuts that have heightened investor interest in the precious metal. Adrian Ash, director of research at BullionVault, likened gold’s rally to that of stocks and bonds, attributing it to the Federal Reserve’s indication that rate cuts are imminent as a response to subdued inflationary pressures.
The prospect of future rate cuts has had a pronounced impact on financial markets, causing the U.S. dollar to weaken and Treasury yields to decline. This environment has significantly enhanced the attractiveness of assets like gold, which offer low or zero yields but serve as safe-haven investments during uncertain economic times. Fawad Razaqzada, a market analyst at City Index and Forex.com, noted that weak economic data and lower inflationary pressures have further suppressed bond yields, thereby supporting the positive outlook for gold.
On the Comex exchange, the August gold contract rose sharply by $38.90, or 1.6%, settling at a record-high price of $2,467.80 per ounce. This surpassed the previous record settlement of $2,438.50 set on May 20. In intraday trading, gold prices peaked at $2,470.20, surpassing the previous intraday high of $2,454.20 from the same day in May.
The strength in gold prices also lifted the SPDR Gold Shares exchange-traded fund (ETF) to a new all-time intraday high of $227.98 before settling at $227.87, marking a 1.8% increase for the day. Ryan McIntyre, managing partner at Sprott, indicated a potential rebound in demand for gold ETFs, particularly among financial advisers and institutional investors, following a period of decline since October 2020.
Geopolitical uncertainties, including the recent assassination attempt on former President Donald Trump, have further boosted gold’s appeal as a safe-haven asset. Edmund Moy, senior IRA strategist at U.S. Money Reserve, highlighted that such events heighten political uncertainty, influencing market sentiment and contributing to the upward momentum in gold prices.
Looking ahead, market participants are keenly awaiting Federal Reserve Chair Jerome Powell’s upcoming remarks and economic data releases, such as GDP figures from China, which could influence the Fed’s decision-making on interest rates. Moy emphasized that while short-term fluctuations in gold prices may be influenced by the Fed’s cautious stance, the medium to long-term outlook remains bullish due to expectations of interest-rate cuts, geopolitical tensions, and ongoing central bank demand for gold.
In conclusion, the confluence of economic factors and market dynamics continues to position gold as a strategic asset in investors’ portfolios, offering potential for further price appreciation amid global economic uncertainties and evolving monetary policies.