The gold price stayed close to record highs today as rising hopes of a U.S. interest rate cut later this week kept the precious metal shining.
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The spot gold price was sitting at just over $3,643 in early trading, narrowly below the previous record high of $3,673.95 set last week.
Rate Expectations
Gold investors are glowing ahead of a likely rate cut from the U.S Federal Reserve this Wednesday.
Analysts believe that a 25bp rate cut is fully priced in by the Federal Funds Futures market, but there is a small chance of a 50bp rate cut.
Expectations of rate cuts have bolstered demand for gold, which tends to look more attractive during times of low interest rates.
However, profit-taking by investors and a stronger U.S. dollar capped the record price surge.
KCM Trade chief market analyst Tim Waterer said: “The bullish outlook remains in place; however, a period of consolidation or a minor pullback would arguably be a healthy outcome that supports gold’s ambitions for hitting loftier price targets down the road.”
U.S. inflation data for August came in slightly above expectations on Thursday, but investors anticipate this will not deter the Fed from cutting rates.
“The risk for gold this week is that the Fed may not be so clear-cut in signalling when further rate cuts could arrive,” Waterer said.
Next Steps
Indeed, Kathleen Brooks research director at XTB, said the bigger question was what the Fed does next.
“There are currently just under six rate cuts priced between now and January 2027. In recent months there has been a massive recalibration in Fed rate cut expectations due to a softening in the labour market and massive pressure from the White House to cut rates,” Brooks said. “The question now is, has the market got too far ahead of itself, and will the Fed push back on the rate-cutting narrative due to stubbornly high inflation, which remains well above the Fed’s target rate?”
Gold has surged this year as investors see it as a safe haven in a period of economic and geopolitical volatility. Technical indicators expect this confidence in gold to continue – see below:
Earlier this month leading bank Goldman Sachs (GS) forecast that these drivers, in addition to central banks buying gold, 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.
What are the Best Gold ETFs to Buy Now?
Investors could take advantage of the gold price surge by looking at sector ETFs. We have rounded up the best gold ETFs to buy now using our TipRanks comparison tool.
