Gold prices surged to a record high on Tuesday as anticipation of a September interest rate cut fueled demand for bullion. Gold futures climbed 1.5% to $2,465.30, surpassing the previous peak of $2,454.20 set in May. Spot gold hit an all-time high of $2,465.19 during the session, marking a significant milestone in the precious metal’s performance.
The surge in gold prices comes as investors are increasingly betting on a rate cut in September. The softer inflation data in June, along with dovish comments from Federal Reserve Chair Jerome Powell, have raised expectations of a decrease in interest rates. Currently, markets are pricing in a 100% chance of a rate cut next month, according to futures trading on the CME FedWatch tool.
A declining U.S. dollar has also contributed to the rally in gold prices. Despite a temporary rebound, the greenback had fallen to a five-week low, prompting investors to “buy-the-dip” and drive up demand for gold. The sentiment towards gold remains strong, given the uncertainties in the global economy and the potential for further rate cuts by the Fed.
Central banks around the world have been increasing their holdings of gold, driving up demand for the precious metal. This trend, along with mounting geopolitical risks, has propelled gold to record highs. With some central banks questioning the safety of USD and EUR-denominated assets, gold has emerged as a preferred alternative for diversifying reserves.
Despite the recent pullback in gold prices earlier this year, the current momentum indicates a bullish outlook for the metal. Analysts at UBS believe that gold prices are poised for further upside potential, especially as investors look to build exposure to the safe haven asset. Gold mining stocks have also benefited from the surge in gold prices, with ETFs and shares of mining companies seeing notable gains.
The record-breaking performance of gold prices reflects the prevailing market sentiment towards the precious metal. With expectations of an interest rate cut and ongoing geopolitical uncertainties, gold remains a favored investment for many investors seeking a safe haven in volatile times.