Gold prices climb towards record high on Tuesday

Gold prices rose on Tuesday, nearing their all-time high, following remarks from Federal Reserve Chair Jerome Powell that raised hopes of a rate cut in September. Investors are awaiting US economic data to gauge the Fed’s next move.

Spot gold rose 0.8 per cent, reaching $2,440.29 per ounce by 12:07 GMT. This places the precious metal just below its all-time peak of $2,449.89 set in May.

Powell’s comments on Monday suggested increasing confidence in inflation reaching the Fed’s target, boosting investor hopes for a September rate cut. This could benefit gold by lowering the cost of holding the metal.

Investors are now looking to US retail sales data, due at 12:30 GMT today, for more insight into the Fed’s next steps.

Gold experienced a meteoric rise in April and May, reaching record highs before retreating in June. This pullback coincided with a delay in anticipated US interest rate cuts and softening physical demand due to the high prices.

The prolonged wait for a rate cut decision creates some uncertainty, said Nitesh Shah, commodity strategist at WisdomTree. This could lead to a subdued third quarter for gold, followed by a renewed rally that pushes prices to a new high.

WisdomTree models suggest that gold was slightly overvalued at the end of June by seven per cent. However, they anticipate a recovery in the current quarter, essentially erasing that overvaluation.

Central bank purchases, a traditionally significant source of demand for gold, have cooled off in recent months. Notably, the Chinese central bank’s absence from the market has been a key factor.

Prices of other precious metals exhibited mixed reactions. Spot silver dipped 0.7 per cent to $30.78 per ounce, platinum edged down 0.2 per cent to $993.10, and palladium fell 0.7 per cent to $943.19.

Attribution: Reuters