Gold prices are on a bullish trajectory, aiming to retest the historic high of $2,450 as of early Tuesday, following recent gains that saw the precious metal hit a two-month peak at $2,440 just a day earlier. The surge is largely attributed to mounting expectations of an imminent interest rate cut by the US Federal Reserve (Fed), a move that traditionally boosts the appeal of non-interest-bearing assets such as gold.
Federal Reserve Chairman Jerome Powell’s recent statements have solidified market expectations of a rate reduction at the Fed’s September meeting. Powell clarified on Monday that the central bank will not delay rate cuts until inflation reaches 2%, emphasizing the Fed’s commitment to ensuring inflation returns to its 2% target with greater certainty.
The anticipation of lower interest rates has exerted downward pressure on the US Dollar and US Treasury bond yields, thereby propelling gold prices towards their historical pinnacle of $2,450.
Earlier today, gold experienced minor pullbacks as the US Dollar capitalized on risk aversion triggered by an attempted assassination on former President Donald Trump during a Pennsylvania rally over the weekend. Market sentiment was additionally influenced by speculation surrounding Trump’s potential electoral prospects.
Furthermore, the US Dollar saw support as investors sought safety following disappointing second-quarter GDP figures from China, which indicated a growth rate of 4.7% year-on-year, marking the slowest expansion since Q3 2023.
Despite a modest recovery in the US Dollar during today’s trading session, gold remains resilient as weak US Treasury bond yields sustain the precious metal’s appeal.
Adding to the positive sentiment, comments from San Francisco Fed President Mary Daly supported gold prices, as she expressed confidence in declining inflationary pressures in her recent speech.
Looking ahead, market focus will turn to the US Retail Sales report and further comments from Federal Reserve officials, crucial indicators that could influence the likelihood of a September rate cut. A weaker-than-expected retail sales figure is anticipated to reinforce expectations of a dovish Fed stance, potentially pushing gold prices even higher.
Moreover, speculation regarding potential stimulus measures from China aimed at bolstering economic growth may provide further upward momentum for gold in the near term.
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