Gold price surges past $2,600 mark amid increasing bets on Fed rate cuts
Gold prices surged above the $2,600 mark on Friday, hitting a new high fueled by expectations of further U.S. interest rate cuts and escalating tensions in the Middle East. The metal was up 1.3% at $2,620.63 per ounce, while U.S. gold futures settled 1.2% higher at $2,646.20.
The rally in gold was given a boost after the Federal Reserve announced a half-percentage-point rate cut, starting an aggressive easing cycle. This move increased the attractiveness of gold as it does not pay interest. In 2024, gold prices have risen by 27%, marking the largest annual increase since 2010, as investors sought to hedge uncertainties arising from prolonged conflicts in the Middle East and other regions.
Despite the record rally, some analysts believe that a correction may be on the horizon. Daniel Ghali, a commodity strategist at TD Securities, highlighted that while there is buying activity following the Fed’s rate cut, the source of this activity is unclear, with minimal ETF inflows and a lack of interest from Asian buyers. Retail demand in top consumer markets like China and India has also been impacted by the rally.
While Commerzbank suggested that the rally may not continue indefinitely, other analysts noted that geopolitical risks, such as conflicts in Gaza and Ukraine, could sustain the demand for gold as a safe-haven asset. The weakening dollar also provided support for gold prices, making the metal more affordable for holders of other currencies.
In the precious metals market, spot silver rose by 1.2% to $31.16, while platinum fell by 1.1% to $978.50 and palladium decreased by 0.5% to $1,074.84.
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Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.