Gold continues to consolidate its position as a key safe haven asset, driven by geopolitical tensions, the weakening dollar and expectations of future interest rate cuts in the United States.
Gold continues its bullish streak, reaching new all-time highs as tensions in the Middle East escalate, reinforcing its position as a safe haven asset. Added to this is weak US economic data, which has heightened expectations of more aggressive interest rate cuts.
Spot gold rose 1.1% to $2,656.38 an ounce on Wednesday, after hitting an earlier record of $2,654.96. The boost was helped by a report showing a significant drop in US consumer confidence in September, the sharpest in three years.
As for US gold futures, they rose 0.12% to $2,680.30. Gold is up about 28% so far in 2024, but recent gains accelerated following the Federal Reserve’s half-percentage-point cut last week.
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DHF Capital SA CEO Bas Kooijman explained that the recent rise in the gold price “is due to favourable market conditions, including dovish statements from several Federal Reserve members and the first rate cut last week.” He added that expectations of further cuts in the coming months could continue to push gold higher in the long term.
Kathleen Brooks, director of research at XTB, noted that “the price of gold could approach $2,700 if the personal consumption expenditures (PCE) price index data beats expectations.”
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The weakening dollar remains a crucial factor in increasing demand for gold. According to Rania Gule, senior market analyst at XS.com, “Although gold does not generate direct returns, it remains attractive for investors looking to protect their wealth amid falling yields on other assets.”
J.Safra Sarasin Sustainable AM believes that the pace of the US economy’s slowdown will be key to future rate cuts and, consequently, to the performance of gold. The fund manager remains optimistic about the metal in the long term, expecting “a weaker dollar in 2025 and a possible weakening of the US labour market, which could further reduce yields.”
Source: Ambito
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