Gold Futures Set Fresh Record on U.S. Rate-Cut Hopes, Central Bank Demand

By Joe Hoppe

Gold futures set a fresh record as optimism around U.S. interest-rate cuts grows and central banks continue to build reserves.

Continuous gold futures on the New York Mercantile Exchange rose 0.8% to $2,561.5 a troy ounce in European midday trading, having reached as high as $2,563.8 earlier in the session. Gold has been on a tear in recent days, with the prior futures record of $2,549.9 an ounce set on Monday.

One of the main drivers behind the rally are growing expectations that the U.S. Federal Reserve will begin easing monetary policy, said Antonio Ernesto Di Giacomo, senior market analyst at XS.com. With the possibility of interest-rate cuts and increased quantitative easing, financial markets have driven up the price of safe-haven assets like gold, while the prospect of a weakened U.S. dollar has made the precious metal even more attractive to both domestic and international investors, Giacomo said in a note.

Markets are pricing in a 24.5% chance of a 50 basis-point interest-rate cut in September, according to the CME FedWatch tool, while a 25 basis-point cut is given a 75.5% probability. Lower interest rates typically boost the investor appeal of non-interest-bearing bullion.

The market is now awaiting the 2024 Jackson Hole Economic Policy Symposium for further Fed guidance, with Fed Chair Jerome Powell's speech on Friday set to be scrutinized for further clues on the scale and timing of rate cuts.

Outside of U.S. monetary policy, China's central bank issued new import quotas, and Chinese exporters and traders are rushing to buy yuan and likely gold in anticipation of further U.S. dollar weakness, SP Angel analysts said in a note.

The yellow metal was buoyed by a rise in Chinese purchases, following a central bank crackdown on local government bond buying, and gold has become a preferred instrument for individual savings in China given troubles in the real-estate market, SP Angel added.

"The combination of lower interest rates, a weaker dollar, and strong central bank demand creates a highly favorable environment for gold and it is plausible that gold could rise further," said Anita Wright, independent financial adviser at Bolton James.

Write to Joe Hoppe at joseph.hoppe@wsj.com

(END) Dow Jones Newswires

August 20, 2024 06:22 ET (10:22 GMT)

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