Gold Achieves New Record Heights Supported by Interest Rate Expectations and the U.S. Government Crisis
Gold prices today, Tuesday, reached unprecedented record levels, amid market optimism regarding the Federal Reserve's direction towards lowering interest rates, while the stalemate between the U.S. Congress chambers continues due to the government shutdown with no signs of a near resolution.
The spot gold price jumped by 0.5% to reach $3984.47 per ounce, while December gold futures rose by 0.6% to $4002.70 per ounce.
Kelvin Wong, senior market analyst at OANDA, expressed optimism, noting that "the odds of a rate cut in October and December still exceed 80%, which supports gold prices, in addition to the ongoing government shutdown in the absence of any agreement between the two sides of the U.S. Congress."
On the other hand, Jeff Schmid, the head of the Federal Reserve in Kansas City, expressed his reservations about further rate cuts, considering that "the Fed needs to focus on the risks of high inflation rather than worrying about a weak labor market."
Despite this stance, markets continue to expect two additional rate cuts of 25 basis points in October and December, as data from the CME Group's FedWatch tool shows that the odds of a cut are 95% and 83%, respectively.
Gold, which is a non-yielding asset, has seen a remarkable surge of 51% since the beginning of the year, supported by strong buying from central banks, increasing demand for gold-backed exchange-traded funds, as well as a declining dollar and rising trade and geopolitical tensions that drive investors towards hedging.
In a related development, Goldman Sachs raised its gold price forecast for December 2026 to $4900 per ounce, up from $4300 in the previous estimate, based on strong flows into Western exchange-traded funds and continued purchases by central banks.
In a related context, prices of other precious metals showed mixed performance, with silver falling by 0.1% to $48.49 per ounce, while platinum decreased by 0.4% to $1619.62, and palladium rose by 0.1% to $1325.71 per ounce.
