Gold Surges to Record High amid Anticipation of Fed Rate Cut; Silver Shows Modest Gain

Gold Prices Hit Record High on Expectations of US Interest Rate Cut

Gold prices surged over 1 per cent to a record high on Tuesday as investors turned to the safe-haven asset following comments from Federal Reserve officials that solidified expectations for a U.S. interest rate cut in September. By 11:01 a.m. ET (1501 GMT), spot gold increased by 1.3 per cent to $2,452.29 per ounce, while U.S. gold futures for August delivery rose 1.2 per cent to $2,457.20 per ounce.

Key Factors Driving Gold Prices

Gold prices saw positive movement as interest rate cut expectations increased among buyers, driven by lower inflation data last week. This has influenced the Fed watch tool towards the possibility of rate cuts rather than holding rates longer. Gold prices rose by ₹250 in MCX and $21 in Comex. Price action is expected to continue due to the upcoming retail sales data release later in the evening.

The Impact of Federal Reserve Comments

At an event on Monday, Powell stated that recent inflation data has strengthened policymakers’ confidence that price pressures are on a sustainable path to remain low. San Francisco Federal Reserve Bank President Mary Daly also commented on Monday that “confidence is growing” that inflation is moving toward the U.S. central bank’s 2 per cent target, which is the benchmark for considering interest rate cuts.

Insight on Gold Trading Trends

Lower U.S. interest rates pressure the dollar and bond yields, thereby increasing the attractiveness of non-yielding bullion. Gold continues to trade positive, supported by a steady dollar and easing bond yields as focus remains on an early rate cut by the Federal Reserve. The bullion was also supported by a rise in safe-haven demand amid signs of political uncertainty in the U.S. and France, and with a close eye on the geo-political developments in the Middle East.

Market Trends in Other Metals

The benchmark 10-year Treasury yield was near a four-month low. In other metals, spot silver inched up 0.1 per cent to $31.05 per ounce, platinum fell 0.2 per cent to $992.63, and palladium increased 0.8 per cent to $958.

Adding Insight:

Investors turned to gold as a safe-haven asset not only due to expectations of a U.S. interest rate cut but also in response to rising political uncertainty worldwide. The demand for gold as a hedge against geopolitical risks has been a significant driver behind the recent surge in prices. Additionally, the ongoing tensions in the Middle East have added to the appeal of gold as a store of value in times of uncertainty.