Gold prices reached record highs on Monday, driven by a weaker dollar and expectations of a significant rate cut by the U.S. Federal Reserve during its upcoming policy meeting. Spot gold was up 0.2% at $2,580.24 an ounce, hitting a peak of $2,589.59, while U.S. gold futures saw a slight decline to $2,607.80. The dollar index dropped by 0.4%, increasing the appeal of gold to buyers holding other currencies.
Phillip Streible, Chief Market Strategist at Blue Line Futures, noted that the market has currently priced in a 50 basis points rate cut by the Fed, which has resulted in the high gold futures prices. However, if only a 25 basis point cut is implemented, gold futures may see a decrease. The focus this week is on the Fed interest rate decision expected on Wednesday, with traders anticipating a 61% chance of a 50 basis points cut, according to the CME FedWatch tool.
The recent assassination attempt on former President Trump has introduced some political uncertainty, which tends to benefit gold prices, according to Peter A. Grant, Vice President and Senior Metals Strategist at Zaner Metals. Gold is often regarded as a safe haven asset during times of political and economic turmoil, and flourishes in a low-rate environment as higher rates diminish the appeal of holding non-yielding gold. ANZ analysts predict that strategic investments in gold will lead to higher prices, with a 100 basis points cut potentially resulting in significant ETF net flows.
ANZ analysts further anticipate that gold prices may rise towards $2,700 in the short term, reaching a high of $2,900 by the end of 2025. Spot silver also experienced gains, increasing by 0.3% to $30.73 an ounce. In contrast, platinum saw a decrease of 1.1% to $984.20, while palladium rose by 0.4% to $1,072.20. The overall positive trend in gold prices is expected to continue due to ongoing economic and political uncertainties along with the possibility of significant rate cuts by the Federal Reserve. Investors are closely monitoring these developments to capitalize on potential gains in the precious metals market.
