Gold futures hit record above $2,460 on hopes Fed will soon cut rates

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An employee handles a kilogram of gold bars at the headquarters of YLG Bullion International Co. in Bangkok, Thailand, Friday, December 22, 2023.

Chalinee Thirasupa | Bloomberg | Getty Images

Gold prices hit a record high on Tuesday as rising expectations of a September interest rate cut boosted demand for gold.

Gold futures The price rose 1.6% to hit an all-time high of $2,467.8 an ounce, after also hitting a new intraday record of $2,474.5 during the session. Gold futures prices are up more than 19% this year.

Spot gold rose 1.9% during the session to $2,468.68 an ounce. LSEG data shows that this is an all-time high since 1968, excluding inflation.

Gold prices hit record highs earlier this year before retreating as the prospect of higher interest rates for longer dampened investor enthusiasm for the precious metal. However, interest in the asset has increased after weaker inflation data from June and some recent dovish comments from Federal Reserve Chairman Jerome Powell combined to increase the likelihood of rate cuts this year. According to futures trading tracked by the CME FedWatch tool, markets are now pricing in a 100% probability of a September rate cut.

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Gold futures, 5 years

A weakening dollar has also boosted demand for gold. On Tuesday, the US dollar rebounded after falling to a five-week low.

“Given the strong sentiment toward gold, there was continued interest among investors to buy on dips. This is likely the reason why the market quickly recovered on weak US data and dovish Fed expectations,” UBS strategist Joni Teves said in a note on Friday.

“With the market just above the psychological $2,400 mark, we believe risks are tilted to the upside,” Teves continued. “We think positioning remains lean and there is room for investors to increase their gold exposure.”

Gold rose to record highs in the first half of 2024, driven by a multi-year surge in demand from central banks around the world as rising global geopolitical risks boosted interest in the safe haven. Central bank gold purchases are at their highest since the late 1960s, according to UBS.

“As some central banks now question the safety of USD and EUR denominated assets (following the financial and debt crisis and, more recently, the war in Ukraine), many are choosing to top up their reserves with gold instead,” UBS said in a note last month.

Gold mining shares also rose on Tuesday. VanEck Gold Miners ETF rose 3.4%, marking the fifth day of gains in six years. The US-listed shares of Harmony Gold and Goldfields increased by 16.1% and 6.3% respectively.

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