Gold climbs to record high amid rate cut hopes

Bengaluru — Gold prices jumped to a record peak on Wednesday, driven by the mounting hope of a US interest rate cut in September after recent comments from Federal Reserve officials.

Spot gold was up 0.2% at $2,473.87/oz by 2.50am GMT, after hitting a record peak of $2,482.29. US gold futures gained 0.3% to $2,475.80.

“Gold reached a new high watermark as investors position for the arrival of a lower interest rate environment. The $2,500 [range] is the next immediate target, though if the current momentum can be sustained we could be looking at prices further north from here before year-end,” said Tim Waterer, KCM Trade chief market analyst.

“Particularly, if we start seeing some more favourable US CPI [consumer price index] prints, which could make the Fed more dovish on rates than is already priced in.”

Markets are expecting a rate cut of at least 25 basis points (bps) by the Fed at September meeting. The allure of non-yielding bullion tends to be higher when interest rates are reduced.

Fed chair Jerome Powell said on Monday recent inflation readings “add somewhat to confidence” that the pace of price increases is returning to the Fed’s target in a sustainable fashion, remarks that suggest a turn to rate cuts may not be far off.

Fed governor Adriana Kugler on Tuesday also expressed cautious optimism that inflation is returning to the US central bank's 2% target.

“If [gold] prices retrace, $2,450 near its previous record high seems like a tempting level for bulls to reload for its next leg higher,” City Index senior analyst Matt Simpson said.

Top consumer China still has plenty of appetite for official gold purchases despite pausing in May and June, as its bullion holdings remain low as a share of reserves and geopolitical tensions persist, according to a policy insider, industry experts and data.

Spot silver fell 0.5% to $31.22/oz, platinum firmed 0.2% to $1,001.97 and palladium added 1.3% to $971.57.

Reuters