Global gold prices fell during Tuesday’s trading, but they are still close to their record highs. Investors are awaiting the minutes of the US Federal Reserve meeting and a speech by its Chairman, Jerome Powell, for clues about the size of the central bank’s interest rate cuts this year. “Gold prices have largely stabilized during the Asian session, and appear to be regaining strength as buyers try to maintain their new record highs,” said the market strategist.
“The uptrend in gold is still intact, which could push prices towards the $2,665 level technically,” Rong added. Meanwhile, a note from Citigroup expected gold prices to reach $3,000 per ounce by the middle of next year, with an average price of $2,550 by the end of 2025, according to Reuters. The Fed’s interest rate tracker tool showed a 77.5% chance of a 25 basis point Fed rate cut at the September meeting, while the other forecasts are for a 50 basis point easing of 22.5%. Gold prices have risen more than 20% this year on investor optimism that the Fed will start cutting rates in September, strong central bank buying, and increased demand for the metal as a safe haven amid tensions in the Middle East. Non-yielding bullion is particularly attractive in a low interest rate environment. The Fed is expected to cut rates by 25 basis points at each of the three remaining meetings in 2024. Traders will be closely watching the minutes of the Fed’s July policy meeting, due out on Wednesday, as well as Chairman Jerome Powell’s speech at the Jackson Hole symposium on Friday, for additional cues.
Fed Rate Cut Expectations
Meanwhile, the US dollar held near a seven-month low, providing support for gold Dollar-denominated. Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose to a seven-month high of 859 tonnes on Monday.
Gold performance yesterday: Gold prices rose during Monday’s trading, supported by expectations of a Federal Reserve rate cut, which reinforced the upward trend that prices started in recent weeks. At settlement, December gold futures rose by 0.15%, or $3.5, to reach $2,541.30 per ounce, the fifth record level this month.
Gold and the dollar currently: Currently, gold futures are down by 0.22%, to reach $2,535 per ounce, while spot gold contracts are down by about 0.26% to $2,498 per ounce. On the other hand, the dollar index rose by 0.1% to reach 101.83 points. Other metals: Spot silver fell 0.4% to $29.36 an ounce. Platinum rose 0.4% to $957.08 and palladium fell 0.7% to $925.47.
Imbaby indicated that gold’s rises on the global stock exchange will push prices in the local market to further increases, even with the stability of the dollar exchange rate at current levels, as well as supply and demand. Imbaby expected gold markets to witness new historical levels, in the event of the dollar moving and increasing demand, as consumer demand increases with rising prices. In a note on Friday, Commerzbank Research raised its expectations for gold, expecting the Federal Reserve to cut interest rates three times by the end of this year and three more times in the first half of 2025. Overall, this means two more cuts than previously expected.
Central banks are a major source of demand for gold
Central banks have been a major source of demand for gold as countries such as China, Turkey and India look to diversify their reserves away from the US dollar, especially since the West froze Russia’s dollar assets in the wake of its invasion of Ukraine. Central banks bought more than 1,000 tonnes of gold last year, according to JPMorgan estimates. The People’s Bank of China embarked on an 18-month buying spree, its longest ever, which finally ended in May, and in June, India’s central bank boosted its gold reserves by the most in nearly two years. Meanwhile, concerns remain about a potential recession, which would drive demand for safe-haven assets such as gold and force the Federal Reserve to cut interest rates.
Minneapolis Fed President Neel Kashkari said Monday that discussion of a possible rate cut in September was appropriate because the balance of risks has shifted more toward the labor market. Chicago Federal Reserve President Austan Goolsbee said current interest rates are too tight, noting that he has become more concerned about disappointing jobs data, and that central bank officials should be cautious about keeping tight monetary policy in place for too long.
In addition, San Francisco Federal Reserve President Mary Daly downplayed concerns about a sharp economic slowdown in the United States, although she said the US central bank needs to take a gradual approach to lowering borrowing costs. Meanwhile, market participants reduced their bets on further monetary policy easing by the Fed after an upbeat July retail sales report released last week eased concerns about a potential recession in the world’s largest economy.
