Gold prices soared to a record high on Monday, fueled by the Federal Reserve’s interest rate cut and heightened demand for safe-haven assets amid geopolitical tensions in the Middle East.
As of 0349 GMT, spot gold increased by 0.2% to $2,628.28 per ounce after earlier reaching a peak of $2,630.93. So far this year, gold has risen over 27%, poised for its largest annual gain since 2010. Meanwhile, U.S. gold futures climbed 0.3% to $2,653.00.
Tim Waterer, chief market analyst at KCM Trade, noted that the combination of declining interest rates, ongoing geopolitical risks, and the approaching U.S. election creates a favorable environment for gold. He added that if the Fed continues its rate-cutting approach, any future dips in gold prices will likely attract buyers looking for better entry points.
The Fed initiated its easing cycle with a half-percentage point cut last Wednesday and anticipates further cuts, forecasting another half-point reduction by year-end and a full point in 2025. Market expectations currently suggest 75 basis points in rate cuts by the end of this year.
Lower interest rates diminish the opportunity cost of holding gold, which is often sought after during economic and political instability.
In related news, tensions escalated in the Middle East as Hezbollah and Israel engaged in significant exchanges of fire, marking a notable increase in conflict intensity.
Traders are now looking ahead to comments from Fed officials and upcoming U.S. PCE inflation data for more insights on future policy directions. Spot silver dipped 0.1% to $31.07 per ounce, while platinum and palladium also experienced declines.
