Gold surges to record $2,500 as Fed rate cuts loom
Ingots of gold are placed in a workroom at Krastsvetmet precious metals plant in the Siberian city of Krasnoyarsk, Russia, January 31, 2023. (Reuters Photo)
Gold prices have surged to a record high, breaking above $2,500 an ounce for the first time, driven by expectations that the U.S. Federal Reserve will cut interest rates at its next meeting.
This comes as new data reveals a sharp slowdown in U.S. home construction, reaching its lowest level since May 2020, early in the pandemic, reports suggest.
On the other hand, money markets are now anticipating a series of rate cuts, totaling three-quarters of a percentage point, by the end of the year. The rally in gold comes as global stock markets experience their strongest week of the year.
What’s driving this record rise?
The dollar index fell from 103.00 to 102.70, driven by growing expectations of a rate cut by the Federal Reserve. U.S. Treasury yields also declined. Meanwhile, U.S. housing starts in July dropped by 6.8%, falling to 1.238 million units, with weaker-than-expected data further contributing to the dollar’s decline and boosting gold prices.
On the other hand, geopolitical tensions have led markets to increase “safe haven” purchases, as investors seek to avoid weekend conflict risks.
Additionally, the rapid global spread of the Monkeypox virus has intensified concerns. Analysts note that diminishing risk appetite is fueling accelerated buying in gold.
