In recent trading days, the gold price has reached record levels. The strongest driver of prices is the prospect of falling interest rates. Following clear indications from the US Federal Reserve, the first interest rate cut since the inflation wave is expected on Wednesday.
However, the American monetary authorities have left the extent and sequence of future interest rate steps open and have made the decision dependent on further developments in economic data.
Since gold itself does not yield interest, the prospect of falling interest rates, for example for government bonds, increases the demand for the precious metal. Over the past week, the gold price has risen significantly, gaining almost four percent in value during this period.
Weaker US Dollar Supports Gold Demand
With the prospect of falling interest rates, the US dollar has also recently lost value, which further boosts the gold price. Since gold is usually traded in dollars on the global market, a depreciation of the American currency makes the precious metal cheaper in many countries, supporting demand and thereby the price.
Additional reasons for a rising gold price include purchases by central banks to increase national reserves and concerns about a further escalation of the geopolitical situation due to the Gaza war in the Middle East and the Russian invasion of Ukraine.