Rate cut and geopolitical woes boost gold

Gold prices extended gains to scale a record high on Monday, driven by the momentum generated by the US Federal Reserve’s interest rate cut and safe-haven demand due to geopolitical risks in the Middle East.

Spot gold rose 0.2% to $2,628.28/oz (R45,645.98) by 3.49am GMT, after hitting a record high of $2,630.93 (R45,700.84) earlier in the session. Non-yielding gold is up more than 27% so far in 2024, heading for its biggest annual rise since 2010. US gold futures gained 0.3% to $2,653.00 (R46,089.69).

“The state of play in the global economy, which consists of declining interest rates, seemingly ever-present geopolitical risks and an upcoming US election has suited gold to a T,” Tim Waterer, chief market analyst at KCM Trade, said.

“If the Fed stays committed to its rate-cutting cycle in the coming months any pullback in gold is likely to have buyers waiting in the wings, with investors potentially eyeing better entry points.”

The US Fed began its easing cycle with a half-percentage point rate cut on Wednesday, forecasting another half-point cut by year-end and a full point in 2025.

Fed futures traders have priced in 75 basis points in rate cuts by the end of this year, according to CME FedWatch.

Lower rates reduce the opportunity cost of holding bullion, which is also viewed as a safe asset amid economic and political turmoil.

For this week, traders will be looking forward to comments from Fed officials and US PCE inflation data due on Friday, for further policy hints.

Spot silver edged 0.1% lower to $31.07/oz (R539.78), platinum fell 0.8% to $967.50 (R16,808.90) and palladium shed nearly 1% to $1,057.38 (R18,372.74).

Reuters