In uncertain times, gold is a popular investment. In addition, falling interest rates make bonds less worthwhile.
The record hunt on the gold market has continued with the prospect of falling interest rates in the USA. In the morning, the price of a troy ounce (about 31.1 grams) on the London stock exchange rose to 2,589.64 US dollars, the highest ever. In euros, the price also reached a record high on Monday at 2,334.80 euros per ounce.
The price of gold had already reached record highs in the last few trading days. The strongest price driver is the prospect of falling interest rates. Following clear indications from the ranks of the US Federal Reserve, the first key interest rate cut since the wave of inflation is expected on Wednesday. However, the American monetary authorities have left the extent and sequence of future interest rate steps open and made the decision dependent on further developments in economic data.
Since gold itself does not pay interest, the prospect of falling interest rates, for example on government bonds, increases demand for the precious metal. The price of gold has been rising sharply for about a week. During this time, the precious metal has gained almost four percent in value. With the prospect of falling interest rates, the US dollar has also recently lost value, which is giving the gold price an additional boost. Since gold is usually traded in dollars on the world market, a weakening of the American currency makes the precious metal cheaper in many countries, which supports demand and thus the price.
Other reasons for the rising price of gold include purchases by central banks to increase national reserves and concerns about a further escalation of the geopolitical situation due to the Gaza war in the Middle East and the Russian war of aggression against Ukraine.
Source: Stern
