Gold Hits Record Levels Supported by Weak Dollar and Interest Rate Cut Expectations
Gold prices recorded an unprecedented rise today, Tuesday, September 2, marking the sixth consecutive session, influenced by the decline in the strength of the US dollar and the increasing expectations that the Federal Reserve will cut interest rates this month.
In price details, gold jumped in spot transactions by 0.6% to reach $3495.01 per ounce, after touching a new historical level of $3508.50 during the session. US gold futures for December delivery also rose by 1.4%, recording $3565.90.
Analysts believe that this surge is supported by two main factors: weak economic performance and expectations of interest rate cuts, in addition to a crisis of confidence in dollar-denominated assets. Kyle Rodda, a financial markets analyst at "Capital.com" told "Reuters": "The weak economy and expectations of US interest rate cuts provide strong support for precious metals." He added: "The escalating crisis of confidence in dollar assets due to President Donald Trump's attack on the independence of the Fed represents another supporting factor for gold."
It is noteworthy that President Trump has directed a series of sharp criticisms at the Federal Reserve and its chairman Jerome Powell for not cutting interest rates, and recently attacked Powell over the high costs of renovating the bank's headquarters in Washington.
For his part, US Treasury Secretary Scott Pisonte emphasized yesterday the independence of the Federal Reserve and the necessity to maintain it, but he also pointed out that the bank "has made many mistakes," and defended President Trump's right to dismiss board member Lisa Cook due to "suspicions of fraud related to a mortgage."
Current market expectations, according to the "FedWatch" tool from the "CME Group," indicate that traders are assigning a 90% probability that the Fed will cut the interest rate by 25 basis points at its scheduled meeting on September 17.
Gold, as a non-yielding asset, benefits from lower interest rates. These expectations, along with concerns regarding the Fed's independence, have contributed to weakening the dollar, which is trading near its lowest levels in over a month against a basket of currencies, reducing the cost of purchasing gold for investors outside the United States.
In a related economic context, official data released last Friday showed that the US personal consumption expenditures price index rose by 0.2% month-on-month and 2.6% year-on-year, in line with analysts' expectations.
Investors are now awaiting the US non-farm payroll data scheduled to be announced next Friday, which will serve as a critical indicator of the expected magnitude of the interest rate cut.
Regarding other precious metals, silver saw a decline in spot transactions by 1.5% to record $40.61 per ounce, after having touched its highest level since September 2011 in the previous session. Meanwhile, platinum rose by 1.6% to $1417.16, while palladium fell by 0.9% to $1126.63 per ounce.
