Hope of imminent Fed rate cut sends gold to record high

Market expectations are leaning towards a 25 basis points rate cut by Fed at their September meeting

MUMBAI: Gold prices surged to a new all-time high on Wednesday, driven by growing expectations of a U.S. interest rate cut in September following recent statements from Federal Reserve officials.

As of 0250 GMT, spot gold rose 0.2 per cent to $2,473.87 per ounce after reaching a record peak of $2,482.29. U.S. gold futures also gained 0.3% to $2,475.80.

“Gold has hit a new peak as investors position themselves for a potential decrease in interest rates. The immediate target now is around $2,500, and if the current momentum continues, prices could rise further before the year-end,” remarked Tim Waterer, Chief Market Analyst at KCM Trade.

“In particular, if we see more favorable U.S. CPI readings, this could encourage the Fed to adopt an even more dovish stance on rates than what is currently priced in.”

Market expectations are leaning towards a 25 basis points rate cut by the Fed at their September meeting. The appeal of non-yielding gold typically strengthens when interest rates are lowered.

Federal Reserve Chair Jerome Powell stated on Monday that recent inflation data “somewhat bolster confidence” that the rate of price increases is aligning with the Fed’s target in a sustainable manner, hinting that rate cuts may be on the horizon.