Gold reaches all-time high as US dollar weakens, spurred by increased Fed rate cut expectations; Bullion sees 2.4% gain in five-day span

Gold Prices Today: The yellow metal soared to an all-time high on Friday, August 16, as the US dollar weakened after positive macroeconomic data led Wall Street to raise bets for an upcoming interest-rate cut from the US Federal Reserve in September. Tensions in the Middle East also bolstered demand for bullion.

Spot gold was last up 1.3 per cent to $2,489.12 per ounce after hitting a record high of $2,500.99 earlier. US gold futures rose 1.4 per cent to $2,527.80. Bullion has risen 2.4 per cent this week. The dollar index fell 0.3 per cent and was on track for a fourth week of losses, making gold more appealing for buyers overseas. 

Silver fell 0.2 per cent to $28.35 per ounce and platinum fell one per cent at $943.10. Palladium dropped 0.9 per cent to $935.43. All metals were on track for weekly gains. Coming to domestic prices, gold futures last fell 1.28 per cent lower at ₹6,404 per 10 grams on the multi commodity exchange (MCX).

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Gold rallies to all-time high: What’s driving the yellow metal?

-Analysts said that gold surged to a fresh all-time high and breached $2,500 after two weeks of extremely choppy trading as bulls finally impose their will. Attention will now shift to focus on Jackson Hole and Fed Chair Powell’s speech a week from today to provide a more detailed outlook on the shape of the upcoming rate cuts.

-US Federal Reserve Chair Jerome Powell is scheduled to deliver remarks on the economic outlook next Friday, the first full day of the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming.

-The July releases of the US producer and consumer price indexes this week indicated inflation was subsiding, which could keep the Fed on track for a 25-basis-point rate cut next month.

-Fed Bank of Chicago President Austan Goolsbee said the US economy is not showing signs of overheating, so central bank officials should be wary of keeping restrictive policy in place longer than necessary.

-Analysts said that ongoing geopolitical strife and potential escalation that Iran could get involved, and the war in Ukraine, could all contribute to safe-haven demand for gold. Bullion is considered a hedge against geopolitical and economic uncertainties and tends to thrive in a low-interest-rate environment.

Also Read: US Federal Reserve ‘must go big with 50 bps interest rate cut in September’ or risk recession: Experts

Where are gold prices headed?

Analysts said gold prices rallied positively towards ₹70,650, gaining over one per cent this week. This upward momentum was driven by positive Gold comex moves above 2465$ in the last two days, as fears of a US recession eased, and the probability of rate cuts in September increased, with the possibility of up to three cuts by 2024. 

‘’Looking ahead, gold is expected to find strong support at ₹70,000, with resistance seen at ₹71,500,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.

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COMEX gold (December) closed 0.5 per cent higher at $2492.4/oz yesterday after briefly dropping below $2470/oz, as mixed US data with easing CPI and stronger retail sales did not provide any fresh insight on the Fed’s monetary policy path. A decline in industrial production and rising business inventories signal potential weakness in the manufacturing sector and slowing demand. 

‘’Earlier in the session, gold prices fell as robust retail sales and lower unemployment claims suggested a less dovish Fed stance. This led investors to lower their expectations from an aggressive 50 bps rate cut in September to a more modest 25 bps,” said Kaynat Chainwala, AVP-Commodity Research, Kotak Securities.