Gold prices reached a new record high on Tuesday, surging over 1 per cent as investors flocked to the safe-haven asset. This increase was fueled by comments from Federal Reserve officials that solidified expectations for a U.S. interest rate cut in September.
At 11:01 a.m. ET (1501 GMT), spot gold rose by 1.3 per cent to $2,452.29 per ounce, while U.S. gold futures for August delivery jumped 1.2 per cent to $2,457.20 per ounce.
According to Jateen Trivedi, VP Research Analyst at LKP Securities, “Gold prices witnessed positive movement as expectations for an interest rate decrease grew following lower inflation data last week. This shift has tilted the Fed watch tool towards the likelihood of rate cuts rather than maintaining current rates. Gold prices saw increases of ₹250 in MCX and $21 in Comex, with further price movement anticipated after the upcoming retail sales data release later today.”
Factors Impacting Gold Prices
During an event on Monday, Federal Reserve Chair Jerome Powell remarked that recent inflation data has bolstered policymakers’ confidence that inflation levels are on track to remain low.
Additionally, San Francisco Federal Reserve Bank President Mary Daly suggested on Monday that there is growing confidence that inflation is progressing towards the central bank’s 2 per cent target, a key factor in considerations for interest rate adjustments.
The prospects of lower U.S. interest rates can weaken the dollar and bond yields, thereby increasing the appeal of non-yielding assets like gold.
Pranav Mer, VP – Research (Commodity & Currency) at BlinkX and JM Financial, noted, “Gold continues to trade positively, supported by a stable dollar and declining bond yields as attention turns to a potential early rate cut by the Federal Reserve. The precious metal is also seeing increased demand as a safe-haven asset amidst political uncertainties in the U.S. and France, along with ongoing geopolitical developments in the middle-east.”
Furthermore, the benchmark 10-year Treasury yield remains near a four-month low. In other metal markets, spot silver edged up 0.1 per cent to $31.05 per ounce, platinum dipped 0.2 per cent to $992.63, and palladium rose 0.8 per cent to $958.
