The price of gold surged to a record high on Tuesday, reaching $2,465.30 as investors anticipated a potential interest rate cut in September. This marked a 1.5% increase from the previous high of $2,454.20 set back in May. The upswing continued as futures peaked at $2,467.30 per ounce during the trading session.
Adding fuel to the fire, a weakening US dollar further fueled the demand for gold. Despite a brief rebound after hitting a five-week low, the greenback’s decline spurred investors to flock towards the safe-haven asset. UBS strategist Joni Teves noted that the sentiment towards gold remained strong among investors, leading to a quick rally in response to soft US data and dovish Fed expectations.
Central banks worldwide have been increasing their gold reserves, driving up demand for the precious metal. UBS reported that central bank purchases of bullion are at their highest levels since the late 1960s. With concerns over the safety of holding USD and EUR-denominated assets, many central banks are turning to gold as a more secure alternative. This shift has contributed to the surge in gold prices in recent years.
Following June’s softer inflation data and dovish comments from Federal Reserve Chair Jerome Powell, markets are now pricing in a 100% chance of a rate cut in September. This shift in expectations has reignited interest in gold as an investment, prompting investors to reevaluate their portfolios. Gold mining stocks also saw gains, with the VanEck Gold Miners ETF rising 3% and individual companies such as Harmony Gold and Gold Fields experiencing significant increases in their share prices.
Despite previous pullbacks in gold prices due to expectations of higher interest rates, the current climate of rate cut speculation and central bank demand has created a bullish outlook for the precious metal. With gold surpassing the psychological $2400 level, some analysts believe that there is room for further growth in the market. Investors are advised to consider building their gold exposure to take advantage of the potential upside in prices.