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Gold surpasses $3,600 as traders consider Fed rate-cut betting

Gold prices reached a new record high on Sunday, surpassing a crucial $3,600 mark after weak U.S. employment data fueled expectations that the U.S. Federal Reserve would cut interest rates at its next meeting.

As of 0841 GMT, spot gold was up by 0.7% to $3,612.20 per ounce. Bullion reached a new record high earlier in the day of $3,616.64.

Bullion prices have risen 37% this year, adding to a gain of 27% in 2024. This is due to a weaker US dollar, central bank purchases, a softer monetary policy, as well as geopolitical, economic, and political uncertainty.

The price of U.S. Gold Futures for December Delivery remained unchanged at $3.653.10.

Data showed that U.S. employment growth was weaker than expected in August. The unemployment rate also increased to nearly a four-year high, at 4.3%. This confirms the softening of labor market conditions and supports a Fed rate reduction next week.

Rate cut bets are increasing demand for gold. The overall geopolitical situation is uncertain. We should also consider that central banks are buying ,",", said Carlo alberto De Casa.

According to CME FedWatch, traders have priced in 90% of the possibility that there will be a 25-bp reduction this month. Lower interest rates reduce the opportunity costs of holding non-yielding gold and weigh down on the dollar. This makes gold more affordable for investors who hold other currencies.

Giovanni Staunovo, analyst at UBS, said: "We expect gold to reach $3700/oz in mid-next year."

The benchmark 10-year U.S. Treasury rates, on the other hand, are nearing their lowest levels in five months.

The Fed will now focus on the U.S. Inflation report due Thursday. This could provide more clarity about the size of its expected rate cut.

StoneX analyst Rhona o'Connell said that CTA activity "was an aid to the continued momentum of gold."

In the week ending September 2, gold speculators increased their net long positions to 168.862 contracts, an increase of 20,740 contracts.

Silver spot rose 0.3%, to $41.08 an ounce. Palladium rose 1.3% and platinum 1.6%, respectively, to $1124.24.

(source: Reuters)