“Gold Price Surges to Record High as Dollar Falls, Fed Rate Cut Bets Rise”
The price of gold has surged to an all-time high, reaching $2,135 per troy ounce before slipping to $2,066. This surge is attributed to a 3.1% fall in the value of the US dollar against a basket of six other currencies, alongside a decline in US Treasury yields as investors grow more confident that the Federal Reserve will lower borrowing costs next year.
This latest increase in gold’s price marks the continuation of a significant rally that began in November last year, driven by central bank purchasing and investor concerns over conflicts in Ukraine and Israel and Gaza. Notably, the previous record high of $2,072.49 per troy ounce was reached in August 2020 amid the turmoil of the COVID-19 pandemic.
Ross Norman, CEO of Metals Daily, believes the recent rise in gold’s price is likely due to speculative flows from futures traders during a time of thin market conditions. Analysts have cautioned that gold may struggle to maintain its gains and consistently trade above the $2,075 per troy ounce mark without sustained buying from a broader range of market participants.
Looking ahead, Marcus Garvey, head of commodities strategy at Macquarie, sees $2,250 per troy ounce as a realistic price if inflation continues to ease in the US. However, Garvey notes that the return of ETF buying, which is currently largely absent, will be key to making a more sustainable break higher.
The surge in gold’s price reflects a broader trend in the market as investors bet on a potential cut in interest rates by the Federal Reserve. Fed Chair Jay Powell recently warned that the central bank could increase rates further, but also stated that policy was already in “restrictive territory.”
Despite the recent bullish momentum, analysts and experts remain cautious about the sustainability of gold’s rally. The dynamics of the market, including the value of the US dollar, interest rate expectations, and the return of ETF buying, will all play a crucial role in determining the future trajectory of gold’s price.