Gold prices topped US$2,500 an ounce for the first time, bolstered by hopes the US Federal Reserve is edging closer to cutting interest rates.
Spot bullion climbed as much as 2.2 percent on Friday, exceeding the previous record set last month, as a disappointing reading on the US housing market reinforced expectations of fast and deeper cuts by the Fed. Lower rates generally are positive for gold as it pays no interest.
Meanwhile, Goldman Sachs Group Inc economists lowered the probability of a US recession next year to 20 percent from 25 percent, citing the latest retail sales and jobless claims data.
Photo: Reuters
The precious metal is up more than 20 percent this year amid mounting optimism on monetary easing and large purchases by central banks. It also has seen increased demand as a haven asset due to rising geopolitical risks, including tensions in the Middle East and Russia’s war with Ukraine.
Bullion began shooting higher earlier in the year — surprising seasoned analysts and veterans as there was not always a clear macro catalyst to justify its price rally. It sustained those gains even as traders dialed back bets on the timing of rate cuts.
More recently, gold has ticked higher as US officials widely are expected to start lowering rates soon.
A slew of US data on recent activities has convinced markets that the US central bank is on the cusp of lowering borrowing costs from a more than two-decade high, with the metal’s conventional drivers returning to the fore.
There is debate around how deep the Fed might cut rates given recent economic readings gave conflicting signals on the state of the US economy.
Goldman economists said they have become “more confident” the Fed would cut interest rates by 25 basis points at their policy meeting next month, but added that “another downside jobs surprise on Sept. 6 could still trigger a 50-basis-point move.”
Gold investors are “typically more prone to think the Fed will be more aggressive on the monetary accommodation front,” TD Securities Inc global head of commodity strategy Bart Melek said.
Prices could rise further to US$2,700 in the coming quarters, as “the macro/monetary and central bank ducks are aligning in a row,” he added.
Speculators boosted their net-bullish bets on Comex gold futures to a near four-year high last week, US Commodity Futures Trading Commission data showed.
Meanwhile, gold holdings in exchange-traded funds have risen over the past few months following a couple of years of outflows, data compiled by Bloomberg showed.
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