The gold price raced to a new record high today as fears over the health of the U.S. economy began to grow.
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Economic Worries
The spot price of gold climbed around 1.4% to $3,638 in mid-trading as shaky investors reacted to softening U.S. labor market data last week. It showed that the U.S. economy added fewer jobs than expected in August, while the unemployment rate climbed to 4.3%, its highest level in nearly four years.
That further raised the likelihood of an interest rate cut by the Federal Reserve later this month.
“The main driver is US jobs data and the expectations now that the Fed could cut by 50 basis points in September. It’s a marginal chance but a material shift from before the jobs figures,” Capital.com financial market analyst Kyle Rodda said. “Basically all of the tailwinds are blowing for gold at the moment and notwithstanding an inflation shock this week, we will make a good test of $3,600.”
Expectations of rate cuts have bolstered demand for gold, which tends to look more attractive during times of low interest rates . A weaker US dollar, another consequence of rate cut expectations, has also made the metal more attractive to buyers holding other currencies.
Golden Future
In addition, gold is proving popular with central banks who are storing it in anticipation of continued global economic volatility.
Last week, leading bank Goldman Sachs (GS) forecast that these drivers, in addition to geopolitical uncertainty, could see the gold price zoom past $4,500 an ounce next year and even hit $5,000 if investors keep piling into the precious metal.
It forecasted that gold could hit $3,700 by the end of 2025 and $4,000 by mid-2026.
However, it said the price could go even higher if there is a major shift by private investors out of U.S. dollar assets into gold. That could push prices to as high as $4,500 per ounce.
Gold has been on quite the march this year as investors flocked to it as a safe haven. That’s because of economic fears caused by Trump’s tariffs and geopolitical fears over conflicts in Ukraine and the Middle East.
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