Global gold prices surged to a new record high during Friday’s trading session (September 13) as investors grew optimistic about the prospect of an interest rate cut at the upcoming Federal Reserve meeting. Increased bets on a more substantial rate reduction by the Fed fueled gold’s remarkable rally.
At the close of trading in New York, spot gold prices rose by $19.40/oz compared to the previous session’s close, representing a 0.76% increase, to reach $2,578.70/oz. Converted using Vietcombank’s selling exchange rate for USD, this price equates to approximately 76.8 million VND per tael, a rise of 300,000 VND from yesterday’s morning rate.
In the futures market, gold prices surpassed the $2,600/oz mark for the first time ever. December gold futures on COMEX peaked at a record $2,611.70/oz before settling with a gain of $25.80/oz, or 1%, at $2,606.40/oz.
After consolidating around the $2,500/oz level due to a lack of fresh catalysts, gold prices decisively broke out to new highs in Thursday’s and Friday’s sessions amid growing optimism about the Fed’s impending pivot towards more accommodative monetary policy. Expectations of lower interest rates also exerted downward pressure on the US dollar, further boosting the appeal of gold.
Gold prices have climbed more than 3% this week and have set 34 record highs so far this year.
According to data from the FedWatch Tool on the CME exchange, traders are now wagering on a 100% probability that the Fed will cut rates at the two-day meeting commencing on Tuesday. However, the likelihood of a 0.25 percentage point reduction has diminished to 55% from over 70% earlier in the week. Conversely, the odds of a more aggressive 0.5 percentage point cut have risen to 45% from less than 30% at the start of the week.
The US Dollar Index, which measures the greenback’s strength against a basket of six major currencies, fell by 0.25% on Friday, settling at 101.11. For the week, the index slipped by 0.06%, and it has declined by 1.32% over the past month, according to MarketWatch data.
Against the Japanese yen, the US dollar slid to its lowest level since the beginning of the year.
According to several analysts, speculators are eyeing the $3,000/oz mark as a potential target for gold’s upward trajectory. Medium-term supportive factors for the precious metal include the shift towards more accommodative monetary policies by major central banks and the tight race for the White House between Republican incumbent Donald Trump and Democratic challenger Kamala Harris.
Kitco Metals’ senior analyst, Jim Wyckoff, emphasized that gold is benefiting from a conducive environment characterized by the European Central Bank’s (ECB) second rate cut of the year on Thursday, the Fed’s anticipated rate reduction next week, and persistently low inflation in the US.
“The market is expecting the Fed to cut interest rates by a full percentage point for the remainder of this year. This implies that there will be one meeting where the Fed cuts rates by 0.5 percentage points. That could be the November or December meeting,” noted a Commerzbank report.
“It seems that such aggressive rate cut expectations are driving gold’s ascent,” the report added.
According to a World Gold Council (WGC) report from last week, gold exchange-traded funds (ETFs) have witnessed net purchases for four consecutive months through August. SPDR Gold Trust, the world’s largest gold ETF, currently holds 870.5 tons of gold, the highest level since the beginning of the year, according to data from the fund’s website.
From a technical perspective, Reuters reports that gold’s Relative Strength Index (RSI) stands at 69, indicating that the precious metal is approaching overbought territory. An RSI reading of 70 or above typically signals that an asset is overvalued and may be due for a correction.
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