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Economic growth

Gold Price Surges to New Record High Amid Federal Reserve Expectations

Strategic Insights

— 1 min read

The price of gold, considered a safe haven in times of economic uncertainty, has reached a new record high of $3,549.40 per ounce, with a gain of 2.2% on the day, its best session in three months. This surge is attributed to investors betting on the US Federal Reserve cutting interest rates in September, amid concerns over the impact of trade tariffs on economic growth.

Key Takeaways:

  • The gold price has reached a new record high of $3,549.40 per ounce, with a year-to-date gain of 35%.
  • Traders are pricing in a 91.7% chance of a quarter-point rate cut from the current range of 4.25% to 4.5% at the Fed's September 17 meeting.
  • Suki Cooper, precious metals analyst at Standard Chartered Bank, expects new record highs for the gold market, citing a seasonally strong period for consumption and expectations for a rate cut.
  • Non-yielding gold typically benefits in a lower interest rate environment, making it more attractive in an environment where central banks' independence is under pressure.
  • Analysts attribute the gold price surge to sustained central bank purchases, diversified safe-haven demand amid geopolitical and trade frictions, and broad dollar weakness.
  • Commerzbank notes that the accusations against Fed governor Lisa Cook are a warning to other FOMC members to bow to government pressure for substantial rate cuts, making gold investments more attractive.
  • Natasha Kaneva, head of global commodities strategy at JP Morgan, notes that central bank buying can continue to hold the floor for gold, supporting the year-end target price of $3,675 an ounce.

Statistics:

  • Gold price: $3,549.40 per ounce
  • Gain on the day: 2.2%
  • Year-to-date gain: 35%
  • Probability of a quarter-point rate cut: 91.7%
  • Current interest rate range: 4.25% to 4.5%
  • Target price for gold: $3,675 an ounce (JP Morgan)
  • Traders' expected probability of a rate cut: 91.7% (CME FedWatch tool)

Sources:

  • Suki Cooper, Standard Chartered Bank
  • Commerzbank
  • Natasha Kaneva, JP Morgan
  • CME FedWatch tool
  • Federal Reserve Bank
  • Reuters

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