Gold clings to record high on growing US rate-cut bets

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Gold prices firmed on Thursday, hovering near a record peak hit in the previous session as traders ramped up bets of a start to interest-rate cut cycle by the US Federal Reserve, constraining gains in the dollar and Treasury yields.

Spot gold XAU= was up 0.2 per cent at $2,464.13 per ounce as of 1006 GMT, having hit an all-time high of $2,483.60 on Wednesday. US gold futures also climbed 0.3 per cent to $2,467.30.

“Gold continues to shine on growing speculation around lower US interest rates this year. Recent dovish comments by Fed officials, complemented with a broadly weaker dollar and subdued Treasury yields have sweetened appetite for the precious metal,” said FXTM senior research analyst Lukman Otunuga.

Further signs of the US labour markets cooling and more dovish remarks by US Fed officials could keep this upside momentum alive, opening doors to fresh all-time highs, Otunuga added.

US Fed Governor Christopher Waller and New York Fed President John Williams both noted the shortening horizon toward looser monetary policy. Separately, Richmond Fed President Thomas Barkin said he is “very encouraged” on broadening declines in inflation.

Lower rates increase the appeal of non-yielding bullion.

Gold price outlook

Gold price will continue to trade higher during the second half of 2024, analysts said in a brief review conducted by LBMA.

According to the World Gold Council, bullion prices strengthened in the second week of July, surpassing US$2,400/oz which was driven by increased expectations of a shift in monetary policy by the US Federal Reserve that has led to a decline in the US Dollar and bond yields.

It added that the yellow metal’s appreciation by 16 per cent this year, makes it one of the best-performing assets globally.

However, the high prices in 2024 had led to subdued demand in the Indian market, the world’s second largest consumer of gold.

While domestic gold prices continue to closely track international gold price, supported by the relative stability of the USD/INR exchange rate, gold jewellery demand remained subdued and was expected to pick up later in the year during the festive season, added the WGC outlook note.

The Indian market has, hence, seen increasing discounts on the domestic gold price to international price, which stayed range bound between US$1/oz to US$12/oz during mid-April to the end of June, has widened sharply since early July. Discounts have now reached as high as US$50/oz, noted the WGC.

This trend is being replicated in other markets. “The surge in (gold) price has stifled the physical markets in south and south-east Asia, with buying evaporating and some selling coming back. This is not unusual and the buyers will return once they have acclimatised to the new range,” said StoneX analyst Rhona O’Connell in a note.

Over the next six to 12 months, Citi expects gold to rise $2,700-$3,000 per ounce and silver to climb $38 per ounce.