One kilogram gold bar at the YLG Bullion International Co. headquarters in Bangkok, Thailand, Friday, December 22, 2023.
Bloomberg | Bloomberg | Getty Images
Gold prices hit a record high on Wednesday as comments from Federal Reserve officials boosted expectations of a U.S. interest rate cut in September
Spot gold rose 0.1% to $2,469.80 an ounce, having hit a record high of $2,482.29 earlier in the session. U.S. gold futures rose 0.3% to $2,474.80.
“It looks like the Federal Reserve will cut interest rates in September, coupled with the de-dollarization concept of central banks buying more gold relative to U.S. Treasury yields, which is currently the catalyst. Pushing gold prices to current highs” Alex, Chief Operating Officer of Allegiance Gold Ebkarian said.
Federal Reserve Chairman Jerome Powell said on Monday that recent inflation data “increases some confidence” that the pace of price increases is returning to the central bank’s goals in a sustainable manner.
The Fed’s Adriana Kugler and John Williams also expressed cautious optimism that inflation would return to its 2% target.
“We’re going to see some volatility because the market needs confirmation that this isn’t just a temporary euphoria,” Abukarian said.
Demand in Western markets, geopolitical risks and potential recession threats could push gold prices to $2,600-$2,700 in the second half of the year, he added.
According to the CME FedWatch tool, the market expects a 98% chance of a U.S. interest rate cut in September. When interest rates are low, the appeal of non-yielding gold increases.
“Safe-haven demand will support demand for gold bars and coins, but rising prices will impact jewelry demand,” UBS analyst Giovanni Staunovo said.
Meanwhile, silver fell 1.2% to $31.02 an ounce, platinum rose 1.7% to $1,017.25 an ounce and palladium rose 1.6% to $974.31 an ounce.
Stanover noted that risk aversion tends to favor gold over the white metal, which is why gold has outperformed other metals.
