The price of gold exceeded the $2,500 per ounce mark for the primary time, supported by hopes that the US Federal Reserve is moving closer to cutting rates of interest.
Spot gold rose as much as 2.2% on Friday, beating the previous record set last month, as disappointing U.S. housing data fueled expectations that the Fed would make swift and deeper rate cuts. Lower rates of interest are generally positive for gold, because it doesn’t pay interest.
The precious metal has risen greater than 20% this 12 months as optimism about monetary easing and enormous purchases by Central banks. Increasing geopolitical risks, including tensions within the Middle East and Russia’s war with Ukraine, have also increased demand for gold as a shelter asset.
Gold prices soared in the beginning of the 12 months – surprising seasoned analysts and veterans, as there wasn’t all the time a transparent macroeconomic catalyst to justify the worth increase. Gold prices maintained these gains at the same time as traders scaled back bets on the timing of rate of interest cuts. Recently, gold prices have edged higher on widespread expectations that U.S. authorities will soon begin cutting rates of interest.
A flurry of US data on recent activity has convinced markets that the Federal Reserve is near cutting borrowing costs from greater than two-decade-high levels, with the metal’s conventional drivers returning to the forefront.
There is debate about how much the Fed could cut rates of interest, as recent economic data has provided conflicting signals concerning the state of the US economy.
Gold investors “typically tend to believe the Fed will be more aggressive in easing monetary policy,” said Bart Melek, global head of commodity strategy at TD Securities. Prices could proceed to rise to $2,700 in the approaching quarters as “macroeconomic/monetary and central bank policies line up,” he said.
Positioning of the investor
Speculators increased their bullish bets on gold futures on the Comex to an almost four-year high within the week ended Aug. 13, data from the Commodity Futures Trading Commission showed. At the identical time, gold holdings in exchange-traded funds have risen in recent months after several years of outflows, data compiled by Bloomberg show.
Traders on Friday examined the newest economic data for clues concerning the outlook for Fed policy. The figures showed that recent construction within the US fell to their lowest level for the reason that pandemic in July as construction corporations responded to weak demand.
This is “another indication that a recession is imminent,” said Bob Haberkorn, chief market strategist at RJO Futures. The Fed will cut rates of interest “and more than previously expected.”
The spot price of gold rose 2.1% to $2,508.82 per ounce (as of 4:06 p.m. in New York). Silver and palladium rose, while platinum was little modified.
