Spot gold (XAUUSD) hit an all-time high of $3,528 on Tuesday as central banks across the globe rush to increase their stockpile of the precious metal. In fact, foreign central banks now hold more gold than U.S. Treasuries as a percentage of international reserves for the first time since 1996, according to Crescat Capital macro strategist Tavi Costa.
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“This is likely the beginning of one of the most significant global rebalancings we’ve experienced in recent history, in my view,” Costa said in an X post.
A Rate Cut Could Boost Gold Prices
The value of gold has now increased by 34% year-to-date, and the upcoming September 17-18 Federal Open Market Committee (FOMC) meeting could give it another boost. The market is currently pricing in a 91.7% chance that the Fed will reduce the federal funds rate by 25 bps this month, up from 86.4% yesterday and 87.8% a week ago.
Gold generally performs better during periods of lower rates because the safe-haven asset doesn’t pay out interest. In other words, lower interest rates make holding gold more attractive because the opportunity cost of forgoing interest from other assets is reduced.
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