Gold prices advanced Tuesday, on track for a record close as rising expectations of a September interest rate cut bolstered demand for bullion.
Spot gold gained 0.7% to $2,438.83 per ounce. Gold futures advanced 0.6% to $2,443.80. Earlier in the day, futures hit a high of $2,448.2, the best level since May 20 when it traded for as much as $2,454.20.
Gold prices hit all-time highs earlier this year before pulling back as the prospect of higher-for-longer interest rates dampened investor enthusiasm for the precious metal.
But interest in the asset has grown after June’s softer inflation data and some recently dovish comments from Federal Reserve Chair Jerome Powell combined to raise the odds of rate cuts coming this year. Markets are pricing in three quarter-percentage point cut coming this year, with the first slated for September, according to the CME FedWatch Tool, which uses 30-day fed funds futures to find probabilities.
A weakening dollar has also supported demand for bullion. On Tuesday, the U.S. greenback rebounded after falling to a five-week low.
“Interest to ‘buy-the-dip’ remained prevalent among investors amid strong sentiment towards gold, which is likely why the market was quick to rally on soft U.S. data prints and dovish Fed expectations,” UBS’ strategist Joni Teves said in a note on Friday.
“With the market sitting just above the psychological $2400 level, we think risks are skewed to the upside,” Teves continued. “We think positioning remains lean and there’s space for investors to build gold exposure.”
Gold rallied to record highs in the first half of 2024 on the back of a multi-year spike in demand from central banks around the world, as mounting global geopolitical risks boosted interest in the safe haven asset. According to UBS, central bank buying of bullion is the highest it’s been since the late 1960s.
“With some central banks now questioning the safety of holding USD- and EUR-denominated assets (following the financial and debt crises and more recently the war in Ukraine), many are choosing to instead fill their reserves with gold,” read a note last month from UBS.
On the flip side, gold has also come under pressure from lackluster Chinese demand. In a recent note, Citi said China central bank and retail consumption of gold is expected to remain weak over the summer, but noted “underlying strength” in demand amid a slow recovery in the China real estate market.
Gold mining stocks also advanced on Tuesday. The VanEck Gold Miners ETF gained 1.2% in the premarket, on pace for a fifth winning day in six. The U.S.-listed shares of Harmony Gold and Gold Fields rose 6% and 4%, respectively. The U.S. listed shares of DRDGold popped more than 5%.