Gold prices strengthened on Monday, approaching a recent record high, driven by strong expectations of a September interest-rate cut following dovish signals from Federal Reserve Chair Jerome Powell and heightened safe-haven demand due to geopolitical tensions in the Middle East.
Spot gold increased by 0.2% to $2,514.73 per ounce at 11:41 a.m. ET (1541 GMT), close to the record high of $2,531.60 reached last week. U.S. gold futures also saw a 0.2% rise to $2,550.30. The dovish remarks from Powell's speech on Friday, coupled with safe-haven interest and geopolitical risks in the Middle East, are boosting gold's appeal today, according to Peter A. Grant, Vice President and Senior Metals Strategist at Zaner Metals.
Hezbollah launched hundreds of rockets and drones at Israel early Sunday. Grant noted, "I have a short-term Fibonacci target for gold prices at $2,539.77, with a secondary target at $2,597.15." Powell endorsed the idea of an imminent rate cut on Friday, stating that further cooling in the job market would be undesirable. Market participants have fully anticipated a cut next month, with a 69.5% probability of a 25-basis-point reduction and a 30.5% chance of a 50 bp cut, according to the CME FedWatch tool. Gold, traditionally viewed as a hedge against geopolitical uncertainties, often benefits from a low-interest-rate environment.
"There might be signs that China will re-enter the market, but even if they don't, central bank demand has been strong this year regardless of price, and that trend is expected to continue," Grant added. Gold demand in major consumers India and China is anticipated to rise in the coming months, according to industry officials.
Spot silver remained stable at $29.81, reaching a high not seen in over a month. "Industrial demand for silver appears robust heading into 2025, especially as demand from solar photovoltaics is expected to maintain a strong growth pace," analysts at Heraeus noted in a report. Platinum edged up 0.1% to $964.10, while palladium fell 0.5% to $958.01.
