Gold Prices Hit Record High on Weaker Dollar
Gold prices surged to a record high on Tuesday, driven by a weaker dollar and increased buying from Western investors, signaling a continuing rally in the precious metal. This surge comes amidst growing speculation that the US Federal Reserve will cut interest rates in September.
The Rise in Gold Prices
Spot gold prices climbed 0.8 per cent to reach $2,524.88 per ounce, surpassing the previous record set just a few days earlier. The London gold price benchmark also hit an all-time high of $2,521.55 per ounce during a morning auction on Tuesday, as reported by the London Bullion Market Association (LBMA).
Factors Driving the Surge
The weakening dollar, with traders anticipating comments from Federal Reserve Chair Jerome Powell later in the week, has played a significant role in boosting gold prices. Marcus Garvey, head of commodities strategy at Macquarie, noted that gold is currently trading in line with expected cross-asset correlations, driven more by the forex market than interest rates at this moment. Interestingly, the surge in gold prices is primarily fueled by Western investor buying.
Insight on Chinese and Swiss Market
The Chinese gold price arbitrage remains weak, with the Shanghai Futures Exchange price trading lower than the Comex price due to subdued demand in China. In contrast, Swiss gold exports for July surged to the highest level since April, thanks to increased supplies to India and Britain, offsetting reduced shipments to China.
Technical Outlook and ETF Holdings
With a 22 per cent price increase so far this year, gold is on track for its best performance since 2020. However, from a technical standpoint, gold’s Relative Strength Index is gradually approaching the “overbought” zone, signaling a potential correction. Despite modest gold ETF inflows, Garvey emphasized a positive structural backdrop for the gold market.
Looking at ETF holdings, SPDR Gold Trust, the world’s largest gold-backed ETF, saw holdings rise to their highest level in seven months at 859 tons on Monday.
Other Metals Performance
In addition to gold, other metals also experienced gains, with spot silver rising 1 per cent to $29.77 per ounce, platinum gaining 0.9 per cent to $962.26, and palladium increasing by 0.6 per cent to $936.96.
Overall, the current market conditions, including the weaker dollar and increased buying from Western investors, suggest a bullish trend for gold prices in the near term.
