Gold prices surged to new highs on Friday as expectations of interest rate cuts by the Federal Reserve continued to support demand for the precious metal.
At 09:55 ET (13:55 GMT), gold rose 1.5% to $2,493.86 an ounce, while silver gained 1.6% to $2,533.10 an ounce. Both benchmarks are on track for weekly gains exceeding 2%.
Gold heads for weekly gains amid rate cut bets
Soft inflation data released earlier in the week heightened speculation that the Federal Reserve will implement rate cuts in September. Traders are now leaning more towards a 25 basis point cut rather than a 50 bps reduction, after a monthly increase in consumer inflation data. Furthermore, the stronger than expected retail sales figures provided a boost for the U.S. economy, somewhat diminishing the expectation for a larger rate cut.
However, the lower interest rate environment remains favorable for gold as it reduces the opportunity cost of holding non-yielding assets. Additionally, concerns over potential conflict in the Middle East between Iran and Israel have contributed to the safe-haven appeal of gold.
Buy gold as Middle East hedge – Alpine Macro
Alpine Macro recently advised investors to consider buying gold as a hedge against escalating geopolitical tensions in the Middle East. The research firm highlighted the likelihood of increased violence in the region, with the potential for Iran to initiate limited attacks on Israel out of pressure to establish deterrence.
They also warned of the possibility of unexpected actions by Iran, such as declaring itself a nuclear power, which could introduce further risks and alter the regional power balance significantly. The note from Alpine Macro emphasized the potential for the Middle East conflict to intensify over the next 6-9 months.
Copper edges lower, but Escondida strike brings weekly gain
On the industrial metals front, copper prices dipped slightly on Friday but were poised for their first weekly gain in six weeks due to a strike in the world’s largest copper mine, Escondida, which impacted global supply outlook.
Benchmark copper on the London Metal Exchange decreased by 0.4% to $9,105.50 a ton, while one-month copper fell 0.7% to $4.1218 a pound. Despite the minor drop, both contracts were up over 2% for the week, breaking a five-week losing streak.
The strike at Chile’s Escondida mine, responsible for 5% of global copper production, has tightened the global supply scenario, offering support to copper prices. However, concerns over weak copper demand, especially due to underwhelming economic data from top copper importer China, constrained larger gains in the metal.
(Ambar Warrick contributed to this article.)
