Gold prices hit record high on Fed rate cut expectations
Gold prices surged more than 1% to reach an all-time high on Thursday, driven by increasing expectations of an interest rate cut by the Federal Reserve next week as U.S. data indicates a slowing economy.
As of 9:46 a.m. ET (1346 GMT), spot gold had risen 1.6 per cent to $2,551.19 per ounce, while U.S. gold futures climbed 1.4 per cent to $2,578.90.
Support and Resistance levels
“Gold found support near $2,510 in Comex and ₹71,900 in MCX today, with the dollar index remaining stable and interest rate cut expectations keeping buying interest at lower levels. This will likely keep prices range-bound until the policy announcement and subsequent projections. Gold prices are expected to hold support in the ₹71,750-₹71,500 range, while resistance is seen in the ₹72,200-₹72,350 zone. In Comex, gold faces resistance near the $2,525-$2,530 level,” according to Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
What’s behind the rally?
The U.S. Labor Department reported that initial claims for state unemployment benefits rose by 2,000 to a seasonally adjusted total of 230,000 in August. In addition, U.S. producer prices increased slightly more than anticipated due to higher service costs, though the overall trend aligns with easing inflation.
Market expectations
According to the CME FedWatch tool, markets are currently factoring in an 87 per cent probability of a 25-basis-point rate cut at the Federal Reserve’s September 17-18 meeting, with a 13 per cent chance of a 50-basis-point reduction.
Investing in gold
Gold, which yields no interest, tends to be a favored investment in environments with lower interest rates. This is due to its perceived stability in uncertain economic conditions.
Other precious metals
Palladium also saw a rise of 2.7 per cent to $1,035.69 per ounce, reaching its highest level in over two months, attributed to a short-covering rally. Silver climbed 2.3 per cent to $29.35, while platinum advanced 1.8 per cent to $968.48.
Insight:
Investors often turn to gold as a safe-haven asset during times of economic uncertainty and market volatility, as its value tends to hold or increase in such conditions. Additionally, the performance of other precious metals like silver, platinum, and palladium can also be influenced by similar market factors, such as geopolitical tensions and shifts in supply and demand dynamics.
