Gold prices reached a new peak on Tuesday, driven by a weaker dollar and increased purchases from Western investors, as expectations grew that the U.S. Federal Reserve might reduce interest rates in September. By 1014 GMT, spot gold had climbed 0.7% to $2,522.25 per ounce, surpassing the previous record set on Friday. The London Bullion Market Association (LBMA) reported that the London gold price benchmark also hit an all-time high of $2,521.55 per ounce during a morning auction on the same day.
The dollar remained unstable near a seven-month low, as market participants anticipated rate cuts starting next month, and awaited comments from Federal Reserve Chair Jerome Powell scheduled for Friday. Marcus Garvey, head of commodities strategy at Macquarie, noted that gold's current trading aligns with anticipated cross-asset correlations, although it is more influenced by foreign exchange movements than interest rates.
Garvey also highlighted that the recent surge in gold buying is predominantly from Western investors. Meanwhile, the arbitrage in Chinese gold prices is weak, with the Shanghai Futures Exchange price lagging behind the Comex price, due to reduced demand in China, the largest gold consumer, amid high prices. With a 22% increase in prices this year, gold, a non-yielding asset, is on track for its best year since 2020. Technically, gold's Relative Strength Index, currently at 67, is nearing the 'overbought' zone, which begins at 70.
Despite potential for further growth and modest inflows into gold ETFs, Garvey cautioned that the relatively long discretionary positioning could pose some risks ahead of Powell's speech. However, he maintained a positive outlook for the gold market's structural backdrop. Holdings in the SPDR Gold Trust, the largest gold-backed ETF, rose to 859 tons on Monday, their highest level in seven months.
In other metals, spot silver increased by 0.8% to $29.7 per ounce, platinum rose 1.1% to $963.55, and palladium gained 0.3% to reach $934.50.
