Gold prices have surged 22% in 2024, reaching unprecedented levels, as the dollar weakens and anticipation grows for a potential Federal Reserve rate cut.
Key Developments
Gold continues its rally, maintaining a strong position above $2,500 per ounce.
Investors eyeing Fed’s next move, with minutes from July FOMC meeting due Wednesday.
SPDR Gold Trust holdings reach a seven-month peak.
Price Update as of 1744 GMT
Gold prices maintained their historic ascent on Tuesday, bolstered by a declining dollar and increased speculation that the Federal Reserve may cut interest rates in September. Spot gold climbed 0.3% to $2,510.35 per ounce by 1:44 p.m. ET (1744 GMT), following an all-time high of $2,531.60 earlier in the session. U.S. gold futures also gained, settling 0.4% higher at $2,550.6.
The dollar index fell to a seven-month low, enhancing gold’s appeal for holders of other currencies, while the yield on the benchmark U.S. 10-year Treasury note dipped.
Aakash Doshi, head of commodities for North America at Citi Research, noted that “the primary drivers of the gold price move are financial investment demand, particularly with ETF buying improving and overall improved sentiment as the expectations of Fed easing cycle to begin in September.” Doshi added that gold could potentially hit $3,000 per ounce by mid-2025 and $2,600 by the end of 2024.
ETF Holdings Surge
Reflecting the heightened investor interest, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, jumped to 859 tons on Monday, marking a seven-month high.
According to the CME FedWatch Tool, markets are currently pricing in a 71.5% probability of a 25 basis point rate cut by the Fed in September. Traders are eagerly awaiting the release of the Fed’s July policy meeting minutes on Wednesday and Fed Chair Jerome Powell’s keynote speech at the Jackson Hole symposium later in the week for further indications on the direction of interest rates.
However, Daniel Ghali, a commodity strategist at TD Securities, cautioned that “positioning in gold might be overextended, with expectations of significant Fed rate cuts possibly leading to a correction if this narrative is challenged.”
Gold, which benefits from a low-interest-rate environment, has already gained over 20% this year, on track to achieve its best performance since 2020. Joseph Cavatoni, a market strategist at the World Gold Council, attributed the continued bullish trend to “geopolitical uncertainties, the rise in speculative interest, and substantial global ETF inflows.”
Other Precious Metals
In other markets, spot silver dipped 0.2% to $29.42 per ounce, platinum fell 0.5% to $949.05, and palladium dropped 0.5% to $927.00.