Gold shines on rising Fed rate-cut outlook

12:14 am Thursday, July 18th, 2024

By Ashitha Shivaprasad

(Reuters) – Gold prices edged higher on Thursday, trading not too far away from a record high scaled in the previous session, as rising anticipation of a U.S. interest rate cut in September boosted demand.

Spot gold rose 0.1% to $2,461.27 per ounce, as of 0218 GMT. Prices hit an all-time high of $2,483.60 on Wednesday. U.S. gold futures added 0.2% to $2,465.00.

Decreasing rates and U.S. elections are two immediate factors likely to push gold beyond $2,500, as gold tends to benefit from economic and geopolitical uncertainty, said Ryan McIntyre, senior portfolio manager at Sprott Asset Management.

“Holdings of gold in ETFs (exchange traded funds) appear to have bottomed in May and they are now starting to increase again… there could be a new wave of demand for gold coming through this channel particularly with financial advisors and institutions.”

Lower interest rates increases the appeal of non-yielding bullion.

Fed Governor Christopher Waller and New York Fed President John Williams both noted the shortening horizon toward looser monetary policy. Separately, Richmond Fed President Thomas Barkin said he is “very encouraged” on broadening declines in inflation.

Markets expect a 25 basis point reduction at the Federal Reserve’s September meeting, according to CME’s FedWatch Tool.

U.S. economic activity expanded at a slight to modest pace from late May through early July, with firms expecting slower growth ahead, a Fed survey showed.

“Over the next 6-12 months, regardless of who wins the (U.S.) election, we see gold rising to $2700-$3000 and silver to $38,” Citi Research said.

Investors may want to hedge their equity and currency exposures as potential global trade war looms, especially between the U.S. and China, which could boost precious metals, it added.

Spot silver rose 0.2% to $30.35, platinum steadied at $994.81 and palladium gained 0.4% to $955.77.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Subhranshu Sahu and Rashmi Aich)