Global gold prices surged during Friday’s trading session (August 16), setting an all-time high above the $2,500 per ounce mark, as the US dollar weakened. Additionally, the precious metal market continued to be supported by simmering geopolitical tensions in the Middle East and the possibility of the US Federal Reserve beginning interest rate cuts in September.
At the close, spot gold jumped $51.4 per ounce, or 2.09%, to $2,508.7 per ounce, according to data from Kitco. When converted at Vietcombank’s selling rate, this price is equivalent to nearly VND 76.3 million per tael, an increase of about VND 1.6 million per tael compared to yesterday morning.
This week, global gold prices rose 2.6% and converted prices rose by VND 2.3 million per tael.
Friday’s closing price for gold was the highest ever, and it also marked the first time that spot gold prices surpassed the key resistance level of $2,500 per ounce.
The main driver of this gold price rally was the weakening US dollar. The Dollar Index, which measures the strength of the greenback against a basket of six major currencies, fell nearly 0.6% to close at 102.4 points.
For the week, the index declined by 0.71%, bringing the one-month decrease to 1.91%, according to data from MarketWatch. The downward pressure on the USD stems from the possibility of the Fed initiating interest rate cuts in September, with three rate cuts expected before the end of 2024.
“Gold prices have reached a new record and breached the $2,500 per ounce level after a two-week tug-of-war. The bulls have finally imposed their will on the market,” said independent precious metals trader Tai Wong in New York.
According to Wong, the focus for gold investors next week will be the Fed’s annual central banking conference in Jackson Hole, Wyoming. At this event, Fed Chair Jerome Powell will deliver a speech on Friday. The market anticipates that Powell’s remarks will help provide clearer insights into the outlook for the Fed’s upcoming interest rate cuts.
The July price indexes for the US, released this week, showed that inflation continued to ease, paving the way for the Fed to start cutting interest rates in September. According to the FedWatch Tool from CME, the market is betting on a 100% probability of the Fed reducing rates at each of the three remaining meetings this year.
However, traders lean towards the possibility of a 0.25 percentage point cut in September, with a 72.5% bet on this scenario. The likelihood of a 0.5 percentage point cut at the upcoming meeting stands at only 27.5%.
Speaking on Friday, Chicago Fed President Austan Goolsbee stated that the US economy currently shows no signs of overheating, and thus, it is time for monetary policymakers to be cautious about keeping interest rates too tight for too long.
Recently, financial markets have also been concerned about the possibility of Iran retaliating against Israel for the assassination of a Hamas leader in Tehran in July. On Thursday, a new round of ceasefire negotiations for the Gaza Strip was initiated in Qatar but was then postponed until next week.
“The ongoing geopolitical tensions in the Middle East, the potential for Iran’s direct involvement in the war, and the unresolved conflict in Ukraine—all contribute to the demand for gold as a safe-haven asset,” said Everett Millman, a Gainesville Coins analyst, in a statement to Reuters.
“The gold market has seen strong buying whenever prices dip. As a result, each dip hasn’t turned into a deep correction. This indicates that gold is being strongly supported by new entrants to the market,” Peter Spina, founder of GoldSeek.com, told MarketWatch.
According to Spina, after a period of hesitation, Western investors are now actively buying gold. “As a result, sell-offs have a cushion. Demand for gold is increasing globally,” rather than being concentrated in Asia.
“Investors recognize that there are still many risks in the financial markets and that the world is full of uncertainties, from geopolitical to financial and economic ones. Gold is benefiting from its safe-haven status,” Spina emphasized, adding that gold prices will surge further once the Fed starts cutting rates.
“Western gold buyers are meeting Eastern buyers. Now, there is a price war to grab gold,” he said, noting that gold exchange-traded fund (ETF) demand is at its highest since March 2022, with strong buying from North American and European funds.
According to Spina, the gold market has all the ingredients to set new records in the coming months, and the $3,000 per ounce milestone is closer than it was at the start of the summer. He predicts that this price level will be achieved before the end of the first quarter of 2025.
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