Gold hits record levels, supported by expectations of a US interest rate cut
Gold prices continued their upward march to a new historical high today, surpassing the barrier of 3819 dollars per ounce, amid strong demand from investors who expect a shift in US monetary policy.
Positive trend: more than just a passing wave
It seems that the rise in prices for the yellow metal and other precious metals is not just a temporary trading move, but reflects a strong upward trend supported by two main factors:
Expectations of a cut in US interest rates: personal consumption expenditures inflation data released on Friday strengthened investor confidence that the path of inflation is heading towards calm, increasing the likelihood that the Federal Reserve (the US central bank) will begin to ease its monetary policy later this year.
Weakening of the US dollar: the decline in the prospects for raising interest leads to a weakening of the dollar rate, which makes the purchase of gold (denominated in dollars) less expensive for investors than other currencies, and enhances demand for it.
Market forecast: 90% probability of a cut in October
The market's attention is strongly directed towards the meeting of the US central bank next October, as financial markets estimate the probability of cutting interest rates in that month at 90%, while this percentage rises to about 65% for an additional cut in December.
Expected risks
Despite the positive picture, there are possible storms on the horizon that investors are closely watching:
Threat of a US government shutdown: political tensions may lead to a partial government shutdown, which will delay the release of crucial economic data, most notably the labor market report.
This statistical opacity may complicate the Fed's decision-making process, and add a dose of uncertainty. Trade and politics: former US President Donald Trump added a new element of instability by announcing a new round of tariffs targeting a range of imports such as medicines, trucks and furniture, scheduled to take effect on the first of October.
This step exacerbates trade tensions and confuses the global economic outlook.
