After a record-breaking rally, gold prices dipped on Monday. They settled just above $2,500. Gold prices, which have risen by a staggering 20% this year, were slightly lower on Monday as traders took their profits following last week’s record-breaking rally.
As of 0317 GMT, the spot price of Gold dropped by 0.2% and settled at $2,502.78 an ounce. US gold futures, on the other hand, managed to achieve a modest 0.2% rise, reaching $2.541.80 an ounce.
Gold prices have recently surged due to expectations that the US Federal Reserve will soon cut interest rates. Expectations of a September rate cut have been fueled by a mix of soft economic data including a strong retail sales report, lower than expected unemployment claims and mild inflation.
This economic background has boosted confidence in the US Economy while also increasing gold demand as a hedge against currency depreciation or inflation.
Gold demand is boosted by central bank activity and geopolitical tensions
Increased geopolitical tensions, as well as continued central bank buying, contributed to the rise of $2.509.65 per ounce on Friday.
Gold prices have reached new highs in this year due to the increased demand by central banks and a favorable macroeconomic climate.
Market participants are locking in profits now that gold is trading above the psychologically important $2,500 mark. Market analysts say that this is a normal reaction to such rapid gains.
Recent price movements suggest that the market is entering a consolidation phase as investors weigh up the possibility of future gains versus the risk of short-term corrections.
The market is looking for more clues from the Fed’s Jackson Hole Symposium
The market is waiting for further clarity regarding the Federal Reserve’s policy direction. This is why the attention of the market is now focused on the Jackson Hole Symposium where Fed Chairman Jerome Powell will be expected to give insights into the future policy stance of the central bank.
According to CME FedWatch, traders are pricing in a probability of 75.5% that a rate cut of 25 basis points will occur in September. Powell’s tone and language could be crucial in determining the size and timing for the rate cut.
On Wednesday, the Fed will release the minutes of its July policy meeting. This is expected to provide further insight into the thinking of the central bank. These developments are likely to play a major role in determining the short-term trajectory of gold.
ETFs with gold backing and speculation are on the rise
Recent inflows of money into gold-backed ETFs show that investor interest in gold is still strong. The SPDR Gold Trust (the world’s biggest gold-backed ETF) saw its holdings rise by almost 1% last Friday. This reflects the continued demand from investors for safe-haven investments.
According to the Commodity Futures Trading Commission, the number of speculators on the COMEX futures market has also increased. COMEX gold traders have increased their net long position by 34,197 contract in the week ended August 13.
Chinese banks import more gold amid high prices
The demand for gold appears to be resilient in China, despite the high prices. The central bank of China has recently granted new gold import quotas to several Chinese banks, signaling expectations that the demand for gold in the largest gold market will be revived.
This suggests that Chinese consumers are not deterred by high prices, perhaps due to concerns about the stability of the currency and the economy at home.
Mixed performance in the wider precious metals markets
Silver spot continued to rise, rising by 0.2% per ounce. Platinum rose by 0.4%, to $957.75 an ounce. Palladium, however, bucked this trend and fell by 0.4%, to $947.13.
The varied performance of precious metals markets highlights the many factors that influence these markets. These include industrial demand, supply restrictions, and investor sentiment.
This post Gold closes to historic $2,500 amid Fed Rate-Cut Hopes may be updated as new developments unfold.
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