Gold News : On Monday, gold prices surged, approaching their recent record highs, as strong expectations for a September interest rate cut gained momentum following dovish remarks from U.S. Federal Reserve Chair Jerome Powell. The rally in gold was further fueled by increased demand for safe-haven assets, driven by escalating geopolitical risks in the Middle East.
Spot gold rose by 0.2%, reaching $2,514.73 per ounce at 11:41 a.m. ET (1541 GMT), inching closer to last week’s record high of $2,531.60. Similarly, U.S. gold futures advanced by 0.2%, settling at $2,550.30. The consistent rise in gold prices reflects the market’s response to Powell’s recent speech, which reinforced expectations of an interest rate cut as early as September 2024.
In the commodity markets, Comex gold prices were up by $12, trading at $2,525 per ounce, while MCX gold in India saw an increase of ₹400, reaching ₹72,180 per 10 grams. This rally is largely attributed to Powell’s dovish tone during his speech, which has heightened market expectations for a series of rate cuts starting next month. Markets are now pricing in at least a 0.75 basis point cut by the end of the year. However, the exact timing, magnitude, and frequency of these cuts will be influenced by future economic data, particularly indicators like inflation and employment figures.
Jateen Trivedi, Vice President and Research Analyst of Commodity and Currency at LKP Securities, highlighted the significance of the current market conditions for gold. He pointed out that as a non-yielding asset, gold stands to benefit in a low-interest-rate environment. Trivedi also noted key technical levels, stating that ₹71,500 would act as strong support on any pullback, while resistance is expected at ₹72,500. This suggests that gold could continue to experience upward momentum if the current market dynamics persist.
The driving forces behind the recent surge in gold prices are twofold: dovish signals from Powell’s speech and a surge in safe-haven demand due to rising geopolitical tensions. Over the weekend, Hezbollah, a militant group based in Lebanon, launched hundreds of rockets and drones at Israel, intensifying an already volatile situation in the Middle East. This escalation has further fueled demand for gold, which is often seen as a safe-haven asset during times of geopolitical uncertainty.
Powell’s speech on Friday played a crucial role in shaping market expectations. He emphasized the need for rate cuts, particularly if the job market continues to cool. His remarks have led traders to fully anticipate a rate cut in September, with the CME FedWatch tool indicating a 69.5% probability of a 25-basis-point reduction and a 30.5% probability of a 50-basis-point cut. In such a low-interest-rate environment, gold, which does not offer a yield, becomes more attractive to investors as the opportunity cost of holding it decreases.
Moreover, industry experts expect that demand for gold in major consuming countries like India and China will likely increase in the coming months. Pranav Mer, Vice President of Commodity & Currency Research at JM Financial Services Ltd., noted that gold continues to trade positively, adding to last week’s gains. This upward trend is supported by rising expectations of rate cuts by the U.S. Federal Reserve, which have pushed both the dollar and treasury yields lower. Additionally, safe-haven demand is being bolstered by the ongoing tensions in the Middle East, contributing to the positive sentiment surrounding gold.
Mer also highlighted the role of central banks and ETF investors, who are expected to continue buying gold in the near term. This increased demand from institutional investors is likely to provide further support to gold prices, particularly if geopolitical risks remain elevated and economic conditions continue to point towards a more accommodative monetary policy stance by central banks around the world.
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In addition to gold, other precious metals experienced varying movements on Monday. Spot silver remained stable, trading at $29.81 per ounce, which is its highest level in over a month. Silver, like gold, often benefits from increased safe-haven demand and lower interest rates, making it an attractive investment during periods of economic uncertainty.
Platinum saw a modest gain, edging up by 0.1% to $964.10 per ounce. The platinum market, while not as heavily influenced by geopolitical factors as gold, still benefits from the broader positive sentiment towards precious metals in a low-interest-rate environment.
Palladium, however, faced a slight decline, falling by 0.5% to $958.01 per ounce. Palladium’s price movements are often more closely tied to industrial demand, particularly from the automotive sector, where it is used in catalytic converters. The decline in palladium prices could be a reflection of weaker demand or concerns over future industrial activity.
Overall, the surge in gold prices on Monday highlights the complex interplay of factors currently influencing the financial markets. Dovish remarks from Jerome Powell have set the stage for potential rate cuts, which are being eagerly anticipated by investors. At the same time, geopolitical risks in the Middle East are driving safe-haven demand, further boosting gold’s appeal. With central banks and institutional investors likely to continue purchasing gold, the outlook for the precious metal remains strong in the near term.
As the week progresses, investors will be closely monitoring economic data and geopolitical developments for further clues on the direction of gold prices. The market’s focus will be on the potential rate cuts by the Federal Reserve and how these decisions will impact the broader economy. Given the current environment, gold is well-positioned to continue its upward trajectory, supported by both fundamental and technical factors.