Gold Capitalizes on Rate Cut Hopes, Middle East Tensions

Gold futures exceeded the 2500 mark and are trading at 2,514.00 per ounce at the time of writing; up +1.34%. The price of Gold rose to just under $2,470 per ounce this morning, approaching the record high of mid-July, boosted by comments made by Fed Chairman Powell on Wednesday evening. CFDs on Gold are trading at 2,469.

First Fed Rate Cut Expected In September

Gold price was boosted by comments made by Fed Chairman Powell on Wednesday evening, who opened the door to a rate cut in September at the press conference following the Fed meeting. According to Fed Funds Futures, the market now firmly expects a first rate cut in September.”

After the weak US data yesterday, the market even started to price in a rate cut of 50 basis points, although Powell had actually ruled this out at the press conference. Today’s US labour market data are therefore interesting, especially as Powell had shifted the Fed’s focus more towards the labor market on Wednesday. Disappointing data may intensify the interest rate speculation, and the Gold price could in this case may rise further.

Analysts are still skeptical that the price surge will last. This is because we expect only two interest rate cuts by the Fed by the end of the year, while the market is already pricing in three rate cuts. However, Gold is also receiving support from the increasing tensions in the Middle East, which is benefiting from its stance as a trusted safe haven.