Introduction to Gold Prices
Gold prices have been on the rise in the European market, extending gains for the second day in a row and setting fresh record highs. This surge is expected to continue, with prices possibly surpassing the $3,800 per ounce barrier for the first time in history. The primary factor driving this increase is the ongoing decline in US dollar levels against a basket of global currencies.
Expectations of Interest Rate Cuts
The growing expectations of a more accommodative path for interest rate cuts in the United States are also contributing to the rise in gold prices. Recent signals from the Federal Reserve have hinted at potential rate cuts, which has led to a decline in the US dollar and yields. This, in turn, has supported the increase in gold prices.
Price Overview
Gold prices today have risen by more than 1.0% to $3,785.24 an ounce, the highest level ever, from the opening level of $3,746.28, with a low recorded at $3,736.79. At Monday’s settlement, gold prices rose by 1.65%, marking a second consecutive daily gain and setting a new record high.
US Dollar Performance
The dollar index fell on Tuesday by 0.1%, extending its losses for the second straight session, moving away from a two-week high at 97.82 points. This reflects the continued retreat in US dollar levels against a basket of global currencies. Beyond technical corrections and profit-taking, the dollar remains under pressure from rising expectations of further Federal Reserve rate cuts in the coming period.
US Interest Rates
The Federal Reserve carried out its first interest rate cut since December, lowering rates by 25 basis points last week, while signaling openness to further monetary easing. The Fed’s median projections point to an additional 50 basis points of rate cuts in 2025. The median forecast of Fed members shows one 25 basis point cut in 2026, with a similar reduction expected in 2027.
Jerome Powell’s Speech
Markets are awaiting remarks by Fed Chair Jerome Powell on the US economic outlook, where he is expected to take questions from the audience. This speech is likely to provide strong evidence regarding the course of US monetary policy easing and may influence the direction of gold prices.
Gold Outlook
According to Kelvin Wong, market analyst for Asia-Pacific at OANDA, the short-term trend remains bullish, but a short-term pullback is expected due to technical factors. He added that weakness in the dollar is currently supporting gold. Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 6.01 metric tons on Monday, marking a second consecutive daily increase.
Conclusion
In conclusion, the current surge in gold prices is driven by the decline in US dollar levels and expectations of interest rate cuts in the United States. The upcoming speech by Fed Chair Jerome Powell is likely to provide further insights into the direction of US monetary policy and its potential impact on gold prices. As the global economic landscape continues to evolve, it will be essential to monitor the performance of gold and other assets to make informed investment decisions.
