Gold Hits Record High on Optimism Over US Rate Cut

Gold prices reach all-time high

Gold prices reached an all-time high on Friday, with spot gold hitting a record 0.3% at $2,567.23 per ounce, after peaking at $2,570.21 earlier in the session. This surge was fueled by a weakening dollar amid expectations of a significant reduction in U.S. interest rates next week. The week saw bullion gain about 3%, indicating a strong performance in the precious metal market.

Potential long and frequent easing cycle

The dollar’s decline to a one-week low on Friday made gold more affordable for holders of other currencies, leading to increased demand. Market analysts, such as Tim Waterer from KCM Trade, pointed out that regardless of the size of the initial Federal Reserve rate cut, the prospect of a potential long and frequent easing cycle is favorable for non-yielding assets like gold. This sentiment has contributed to the bullish trend in the gold market.

Insight into U.S. rate cut speculation

Traders are closely monitoring the uncertainty surrounding a possible 25 or 50 basis point U.S. rate cut next week. The International Monetary Fund has expressed support for the Fed to begin a monetary easing cycle at its upcoming meeting. With a 41% chance of a 50-bp reduction and 59% odds of a 25-bp cut, investors are awaiting further clues on the rate outlook from U.S. consumer sentiment data.

Price momentum and potential increase

ANZ commodity strategist Soni Kumari highlighted the strong price momentum in the gold market, suggesting that prices could reach $2,600 in the short term. This positive outlook reflects the current bullish trend driven by various factors including the weakening dollar and expectations of a rate cut.

Other precious metals’ performance

In addition to gold, spot silver rose 0.3% to $30.01, and platinum gained 0.7% to $983.95, both on track for weekly gains. Palladium also climbed 0.4% to $1,050.50 and is set for its best week since December 2023. The surge in palladium prices is partly fueled by concerns over export curbs, as highlighted by Russian President Vladimir Putin’s statement on considering restrictions on exports of certain metals.

Overall, the current market conditions, coupled with factors such as the weakening dollar and potential interest rate cuts, are driving the precious metal market to new heights, with gold leading the way.