Gold prices surge on Fed rate cut hopes

Gold prices climbed to a two-week high on Thursday, buoyed by Federal Reserve Chair Jerome Powell’s indication of potential interest rate cuts as early as September.

Spot gold traded at $2,444.88 per ounce, marginally unchanged but having reached a peak of $2,483.60 earlier in the session, just $39 shy of its all-time record. US gold futures gained 0.7 per cent to $2,489.10.

“The trend for gold remains bullish and prices should hit $2,500 this year as the Fed lowers interest rates,” said Peter Fung, head of dealing at Wing Fung Precious Metals.

Fed Chair Jerome Powell suggested that rates could be lowered in September if the US economy progresses as anticipated, signaling the end of the central bank’s fight against inflation.

The zero-yield nature of gold tends to flourish in a low-interest-rate environment.

However, City Index senior analyst Matt Simpson advised caution for gold investors as the price approaches $2,500, noting the metal’s tendency to struggle to maintain gains at these levels.

Market attention turns to the upcoming US payrolls report on Friday. Simpson noted that a significantly stronger-than-expected data could impact gold prices as the week comes to a close.

Geopolitical tensions, particularly the assassination of Hamas leader Ismail Haniyeh in Tehran, have also contributed to gold’s appeal as a safe-haven asset.

Nicky Shiels, head of metals strategy at MKS PAMP SA, highlighted the increasing geopolitical support for gold in the medium to long term.

Meanwhile, silver declined 0.4 per cent to $28.92, platinum lost 0.4 per cent to $973.85, and palladium eased 0.1 per cent to $923.95.

China’s manufacturing sector contracted for the first time in nine months in July, according to a private survey, potentially impacting demand for key metals.

Attribution: Reuters