Rate cut hopes burnish gold

Bengaluru — Gold prices rose on Thursday, trading not too far from a record high scaled in the previous session, as rising expectation of a US interest rate cut in September lifted demand for non-yielding bullion.

Spot gold was up 0.4% at $2,467.48/oz by 2.18am GMT. Prices hit a record high of $2,483.60 on Wednesday. US gold futures also climbed 0.4% to $2,469.90.

Decreasing rates and US elections were two immediate factors likely to push gold beyond $2,500, as gold tends to benefit from economic and geopolitical uncertainty, said Ryan McIntyre, senior portfolio manager at Sprott Asset Management.

“Holdings of gold in ETFs [exchange traded funds] appear to have bottomed in May and they are now starting to increase again ... there could be a new wave of demand for gold coming through this channel particularly with financial advisers and institutions.”

Lower interest rates increase the appeal of non-yielding bullion.

Fed governor Christopher Waller and New York Fed president John Williams both noted the shortening horizon towards looser monetary policy. Separately, Richmond Fed president Thomas Barkin said he was “very encouraged” on broadening declines in inflation.

Markets expect a 25 basis point reduction at the Federal Reserve’s September meeting, according to CME’s FedWatch Tool.

US economic activity expanded at a slight-to-modest pace from late May through early July, with firms expecting slower growth ahead, a Fed survey showed.

“Over the next six to 12 months, regardless of who wins the [US] election, we see gold rising to $2,700-$3,000 and silver to $38,” Citi Research said.

Investors could want to hedge their equity and currency exposures as potential global trade war loomed, especially between the US and China, which could boost precious metals, it said.

Spot silver rose 0.4% to $30.40, platinum firmed 0.6% at $1,000 and palladium gained 0.6% to $957.31.

Reuters