Gold Approaches Record High as Rate Cuts and Geopolitical Chaos Fuel Surge

EDITOR'S NOTES

Gold is closing in on record highs as a perfect storm of geopolitical turmoil and expectations of a U.S. rate cut drives investors toward the safe-haven asset. With the Federal Reserve signaling a shift toward lower interest rates and tensions in the Middle East escalating, gold prices have soared, coming within reach of last week’s peak. As markets brace for further instability, gold’s climb appears far from over, making it the go-to asset in an increasingly uncertain world. Find out why gold prices are reaching record levels amid speculations of September rate cut and escalating geopolitical risks.

Eric Blair Aug 27, 24

Gold prices firmed on Monday, nearing its recent record high, amid solid bets of a September interest-rate cut following dovish signals from Federal Reserve Chair Jerome Powell and safe-haven demand due to geopolitical risks in the Middle East.

Spot gold rose 0.3% to $2,518.47 per ounce at 01:45 p.m. ET (1742 GMT), just shy of the record high of $2,531.60 hit last week.

U.S. gold futures settled 0.3% higher at $2,555.20.

The dovish signals from Powell's speech on Friday and safe-haven interest and geopolitical risks in the Middle East are precipitating the bid in gold this morning, said Peter A. Grant, Vice President and Senior Metals Strategist at Zaner Metals.

Hezbollah had launched hundreds of rockets and drones at Israel early on Sunday.

"I've got a short term kind of Fibonacci objective (for gold prices) at $2,539.77 and then my secondary is at $2,597.15," Grant added.

Powell on Friday endorsed an imminent start to rate cuts, saying further cooling in the job market would be unwelcome.

Traders have fully priced in a cut for next month, with a 69.5% chance of a 25-basis-point (bp) reduction and a 30.5% chance of a 50 bp cut, according to the CME FedWatch tool, opens new tab.

Bullion, traditionally seen as a hedge against geopolitical risks, tends to thrive in a low-interest-rate environment.

"There might be some indication that China is going to come back in, but even if they don't, demand from central banks has been pretty robust regardless of price this year and that's going to continue," Grant said.

Gold demand in top consumers India and China is expected to improve in the next few months, industry officials said.

Spot silver rose 0.6% to $29.98, hitting a more than a month high.

"Industrial demand for silver looks relatively strong going into 2025, particularly as demand from solar photovoltaics looks to retain a good pace of growth," analysts at Heraeus wrote in a note.

Platinum gained 0.1% to $963.80, while palladium held steady at $963.00.

This article originally appeared on Reuters.