Gold prices surpassed $3,500 per ounce for the first time on Tuesday, reaching a record high of $3,508.50. This surge is attributed to a weakened dollar and increasing expectations of an interest rate cut by the Federal Reserve in September, which has enhanced the appeal of the precious metal.
So far this year, bullion has seen a remarkable rise of over 30%. Kyle Rodda, a financial market analyst at Capital.com, noted, “A corollary of the weaker economic backdrop and expectations of US rate cuts is boosting precious metals.” He added that confidence in dollar assets is eroding, partly due to ongoing criticism from former President Donald Trump regarding the Fed’s independence.
Throughout recent months, Trump has publicly criticized the Fed and its chair, Jerome Powell, for their reluctance to lower interest rates, even targeting Powell over the costly renovation of the Fed’s Washington headquarters.
On Monday, Treasury Secretary Scott Bessent shared insights with Reuters, affirming that while the Fed is and should remain independent, it has “made a lot of mistakes.” He also defended Trump’s ability to dismiss Fed Governor Lisa Cook due to allegations concerning mortgage fraud.
Market traders are currently predicting a 90% likelihood of a quarter-point Fed rate cut on September 17, as indicated by the CME FedWatch tool. In a low-interest-rate environment, non-yielding gold tends to perform particularly well.
The implications of anticipated rate cuts and concerns regarding the Fed’s autonomy have placed pressure on the US dollar, which is hovering near a one-month low against other currencies, thereby making gold more affordable for international buyers.
Gold is traditionally viewed as a reliable hedge against geopolitical and economic instability. This year, it has continuously reached new record highs, fueled by substantial purchases from central banks shifting away from the US dollar, increased demand for safe-haven assets amid ongoing geopolitical tensions, and overall dollar depreciation, according to analysts.
In 2024 alone, gold prices increased by 27%, breaking the $3,000 per ounce mark in March as uncertainty regarding Trump’s trade policies drove investors toward this safe-haven asset.
Tim Waterer, chief market analyst at KCM Trade, stated, “Gold’s rally could extend to $3,600 and even beyond by year-end if the Fed follows through with multiple rate cuts and if a Russia-Ukraine peace deal remains elusive.”
As anticipation builds, investors are eagerly awaiting the release of the US nonfarm payrolls data this Friday to assess the potential size of an expected Fed rate cut later this month.
Meanwhile, the price of silver remained stable at $40.64 per ounce after experiencing its highest levels since September 2011 in the previous session.
