New Record Levels for Gold Prices Amid Interest Rate Cut Bets

SadaNews - Today, Tuesday, the price of gold recorded a new record level due to increasing expectations of a rate cut in the United States following weak U.S. employment data released last week.

The price of the precious metal rose by 0.3% to over $3,647 per ounce, surpassing Monday's peak and driven by gains of 2.5% over the previous two sessions.

Investor bets have increased that the Federal Reserve may implement three interest rate cuts during 2025, including a quarter-point cut at its meeting next week. Gold often benefits from lower interest rates, as it does not yield a return on holding it.

Awaiting Critical Data

The continued rise in gold prices will depend, according to traders, on the review of U.S. employment data expected to be released later today, as well as inflation data (producer and consumer prices) set to be released on Wednesday and Thursday. Investors are also monitoring short- and long-term Treasury bond auctions for market direction indicators.

Gold prices have jumped nearly 40% since the beginning of the year, supported by increasing purchases from central banks worldwide, intensifying demand as a safe haven amid geopolitical tensions, and expectations of monetary easing in the United States.

Additionally, the tariffs imposed by former President Donald Trump raised concerns about the global economy, while his repeated criticisms of the Federal Reserve contributed to increasing demand for gold.

Goldman Sachs stated that the yellow metal could head toward $5,000 per ounce if investors decide to shift part of their assets from U.S. bonds to gold, amid signs of increasing political intervention in central bank policy.

ETFs Add to the Momentum

Exchange-traded funds (ETFs) have increased their gold holdings since the "Jackson Hole" conference last month, where Fed Chair Jerome Powell hinted at greater flexibility in monetary policy. ETFs recorded the highest daily inflows in nearly three months on Monday.

Despite these increases, the total gold holdings of ETFs are still below the levels recorded during the COVID-19 pandemic and the outbreak of the Russia-Ukraine war, allowing more room for gains.