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Gold prices surged to an all-time high during Asian trading on Friday, driven by persistent speculation that the Federal Reserve will cut interest rates in the coming week. Increased demand for the safe-haven asset amid uncertainties surrounding the U.S. presidential election further boosted the yellow metal’s appeal.
Gold continued its upward momentum from Thursday, benefiting from a weakening dollar and falling Treasury yields. Investors remained optimistic about a potential rate cut, despite some stronger-than-expected inflation data earlier in the week.
Spot Gold Reaches New Record, Futures Close in on $2,600
Spot gold climbed 0.3% to $2,566.59 an ounce, while December gold futures rose 0.6% to $2,594.70 an ounce by 23:47 ET (03:47 GMT). Spot gold reached a record high of $2,570.06 earlier in the session, with futures nearing the $2,600 mark.
Rate Cut Speculation Lifts Gold
Gold’s rally was primarily driven by expectations that the Fed will announce an interest rate cut during next week’s meeting. However, uncertainty remains over the scale of the potential cut. While stronger inflation readings earlier in the week had led to expectations of a 25 basis point (bps) reduction, weaker labor market data, particularly a rise in jobless claims, rekindled hopes for a 50 bps cut.
According to the CME Fedwatch tool, traders are now pricing in a 58% chance of a 25 bps cut and a 42% chance of a 50 bps reduction. Analysts believe this meeting will kick off an easing cycle, with expectations for the Fed to cut rates by at least 100 bps by year-end, with two more meetings scheduled after September.
Lower Rates Boost Precious Metals
Lower interest rates typically benefit gold and other non-yielding precious metals by reducing the opportunity cost of holding such assets. Platinum futures gained 0.6% to $989.80 an ounce, while silver futures rose by the same margin to $30.28 an ounce, although they still trailed behind gold in terms of gains.
