Gold reached a new record high on rising hopes for a U.S. interest-rate cut and geopolitical tensions, rapidly reclaiming lost ground after a market crash and selloff in early August.
Continuous gold futures on the New York Mercantile Exchange rose 1.6% to $2,533.4 a troy ounce in European afternoon trading, having reached as high as $2,538.7 earlier in the session. The prior all-time futures record was $2,522.5 an ounce on Aug. 2. Meanwhile, spot gold broke above the $2,500 barrier for the first time.
The precious metal, which has repeatedly reached all-time highs since March, is riding on a global market recovery, but is particularly supported by safe-haven demand and growing rate-cut hopes, said FxPro senior market analyst Alex Kuptsikevich. Gold has moved in tandem with equities this month, but it fell less aggressively during the selloff and outpaced the wider rally, Kuptsikevich said in a note.
Early August’s market turmoil—in which gold futures sank as low as $2,403.8—now feels like a distant memory, after better-than-expected U.S. economic data eased worries of a severe downturn in the world’s largest economy, said Saxo Bank’s head of commodity strategy Ole Hansen.
The latest U.S. data also makes a good case for an interest-rate cut by the Federal Reserve next month, though it is likely to be a modest 25 basis point cut rather than the market’s previously hoped for 50 basis points, Alex Ebkarian, chief operating officer of precious metals dealer Allegiance Gold, said.
Regardless of early August’s profit-taking, investors will continue to be driven toward gold as a safe-haven asset given persistent geopolitical tensions and volatility in the market, along with the anticipated rate cut, Ebkarian added.
Buying has firmed up from sources other than financial funds, said Paul Wong, market strategist at Sprott. The U.S. dollar and yields have broken significant support levels and market deleveraging has stopped, ending any gold selling, Wong said.
The war in Ukraine and ongoing conflict in the Middle East, alongside tensions between the U.S. and China, suggest that safe-haven demand will continue to support gold prices in the short to medium term, ING analysts said in a note.