U.S. Interest Rate Cuts and Geopolitical Tensions Propel Gold to Record Highs

 

Gold price today

The decline in U.S. interest rates and rising geopolitical tensions have driven gold prices to new record highs.

As of 03:49 GMT, spot gold increased by 0.2% to $2,628.28 per ounce, after reaching an all-time high of $2,630.93 earlier in the session. So far this year, gold has surged over 27%, on track for its largest annual gain since 2010.

U.S. gold futures rose 0.3% to $2,653.00.

“The current global economic landscape, characterized by falling interest rates, widespread geopolitical risks, and the upcoming U.S. election, provides the perfect environment for gold to thrive,” said Tim Waterer, chief market analyst at KCM Trade.

“If the Federal Reserve continues its interest rate-cutting cycle in the coming months, any dip in gold prices will likely attract buyers waiting on the sidelines, as investors look for more favorable entry points.”

The U.S. Federal Reserve kicked off its easing cycle by cutting rates by half a percentage point on Wednesday, with plans for another half-point cut by year-end and a full-point reduction next year.

According to CME FedWatch, futures traders are anticipating 75 basis points in rate cuts by the end of the year.

Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, which is also seen as a safe haven during times of economic and political instability.

Meanwhile, Hezbollah and Israel exchanged heavy fire over the weekend, with the Lebanese militant group launching rockets into northern Israel amidst intense shelling, marking one of the most significant escalations in nearly a year of conflict.

This week, traders will closely watch remarks from Federal Reserve officials and key U.S. inflation data, particularly the PCE index set to be released on Friday, for further insight into monetary policy.

Elsewhere in the market, spot silver dipped 0.1% to $31.07 per ounce, platinum fell 0.8% to $967.50, and palladium dropped nearly 1% to $1,057.38.

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