Gold Surges to All-Time High Above $2,460 an Ounce Amid Expectations of Federal Reserve Rate Cut

Gold Hits Record High as Expectations for Interest Rate Cut Rise

Gold surged to a record high on Tuesday, with gold futures rising 1.7% to $2,471.1 and spot gold jumping 1.8% to $2,465.95. This increase surpassed the previous high set on May 20. The rising expectations of a September interest rate cut have bolstered demand for bullion.

Interest Rates and Gold Prices

Gold prices hit all-time highs earlier this year but retreated due to expectations of higher interest rates. However, with recent softer inflation data and dovish comments from Federal Reserve Chair Jerome Powell, the odds of a rate cut in September have reached 100%. The prospect of lower interest rates has reignited investor interest in gold as a safe-haven asset.

Weakening Dollar and Central Bank Demand

In addition to rate cut expectations, a weakening dollar has also supported the demand for gold. Central banks around the world have been increasing their purchases of gold, with UBS noting that central bank buying of bullion is at its highest level since the late 1960s. This surge in demand is due to concerns about the safety of holding USD- and EUR-denominated assets amidst global geopolitical risks.

Outlook for Gold

UBS strategist Joni Teves believes that the market is poised for further upside potential, with investors showing strong sentiment towards gold. With the market hovering above the $2400 level, Teves suggests that there is room for investors to increase their exposure to gold.

Gold Mining Stocks Rally Alongside Gold Prices

Gold mining stocks also saw gains on Tuesday, with the VanEck Gold Miners ETF rising by 3%. The U.S.-listed shares of Harmony Gold and Gold Fields saw increases of 16% and 6%, respectively, demonstrating the positive sentiment surrounding the gold mining sector in tandem with rising gold prices.