The gold price rose on Thursday and remained close to its record high from the previous session. The rise in gold prices was fueled by the growing expectation of an interest rate reduction for the US in September. This increased demand for precious metals.
As of 218 GMT on Thursday, spot gold rose 0.1%, to $2461.27 an ounce, after reaching a record high of $2483.60 per ounce earlier in the day. US gold futures also rose by 0.2%, to $2465.00.
Gold prices: Factors that influence them
The prospect of lower interest rates, and upcoming US election are two immediate factors that influence gold prices.
In times of economic or geopolitical unrest, gold is a good investment.
According to recent observations, the holdings of exchange-traded fund (ETF) gold have begun to rise again since May’s bottom. The resurgence of gold in exchange-traded funds (ETFs) suggests that a new demand wave for the metal is possible, especially from financial advisers and institutions.
Non-yielding gold is more appealing when interest rates are lower, compared with other investments that yield interest or dividends.
Federal Reserve’s position on monetary Policy
Both New York Fed president John Williams and Fed governor Christopher Waller have highlighted a narrowing horizon toward a more accommodative monetary policy. Richmond Fed President Thomas Barkin has expressed optimism regarding the widening of inflation declines.
According to the CME FedWatch Tool’s market expectations, interest rates will be reduced by 25 basis points at September’s Federal Reserve meeting.
US Economic Activity and Future Projections
Recent survey results from the Federal Reserve showed that US economic growth was modest to moderate between late May and early July. Firms expect a slower pace of growth over the next few months.
Citi Research predicts that gold could reach between $3,000 and $2700 per ounce in the 6-12 month period, irrespective of what happens with the US election. Silver prices are also predicted to rise, with an ounce reaching $38.
Due to the possibility of a trade war between China and the US, investors are encouraged to protect their currency and equity exposures. These conflicts may increase the demand for gold and other precious metals, which are considered safe investments.
Edmund Moy is a senior IRA Strategist at US Money Reserve.
The Fed may start reducing rates in the near future due to the cooling of inflation and the job market. If this happens, gold will probably rise. With new data showing China’s economy is still struggling, Chinese investors are left with few options. Gold happens to be one.
Moy noted that gold could see “a short-term impact” if Fed is cautious, and waits for more data to be supportive before it cuts rates.
He said that over the long-term, the majority of factors driving up the price of gold have not changed. These include geopolitical instabilities, China’s struggling economy and the demand from central banks for gold.
Other precious metals: Market Performance
Other precious metals have also seen gains. Silver spot rose by 0.2%, to $30.35 an ounce.
Palladium rose by 0.4%, to $955.77 an ounce. Platinum was unchanged at $994.81.
As updates occur, this post Gold Prices Hit Record Highs in Anticipation of US Interest Rate Cut may be updated.
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