Gold Price Nearing Its Historical Peak as the Federal Reserve's Decision Time Approaches

SadaNews Economy - Gold is on track to achieve gains for the fourth consecutive week, supported by expectations of the U.S. Federal Reserve cutting interest rates, along with increasing inflows into gold-backed exchange-traded funds.

The price of gold bullion rose to $3,650 per ounce, an increase of nearly 2% this week, after reaching a record high in Tuesday's session. Silver prices, which move in parallel with gold, also surged past $42 per ounce, the highest level since 2011.

Data released on Thursday showed that U.S. consumer prices rose as expected in August, providing policymakers at the Federal Reserve with leeway to reduce borrowing costs following a series of weak labor market data.

Traders expect a cut of at least a quarter percentage point at next week's Fed meeting, with the possibility of two additional cuts by the end of the year. Meanwhile, the U.S. dollar and 10-year Treasury yields declined this week. Precious metals typically benefit from lower borrowing costs and yields, as well as a weaker U.S. dollar.

The price of gold has jumped 39% since the beginning of the year, making it one of the best-performing commodities, outpacing other market indicators like the S&P 500. This increase has been driven by central bank purchases and geopolitical uncertainty, along with inflows into exchange-traded funds. In addition to setting a nominal record this week, gold has also surpassed its inflation-adjusted peak that dates back over 45 years.

Although escalating geopolitical tensions may push prices higher, BMI, a Fitch Solutions company, wrote in a note: "We believe that a rate cut in September will yield limited gains for gold, as most of the rise has already been priced in."

Bloomberg data also showed that gold-backed exchange-traded funds expanded by about 25 tons so far this week.

Gold also received a boost from U.S. President Donald Trump's attempts to strengthen his influence over the U.S. Federal Reserve. On Thursday, he filed a request with the appeals court to stop a lower court ruling that blocked his efforts to oust Fed board member Lisa Cook over alleged mortgage fraud accusations. The U.S. administration has requested a ruling by Monday, just a day before the Federal Reserve's September meeting begins.

Read also: Lisa Cook Sues Trump over His Attempt to Oust Her from the Fed

Gold prices rose by 0.4% to $3,649.33 per ounce at 10:33 AM Singapore time. In contrast, the Bloomberg Spot Dollar Index remained stable but is headed for a weekly loss of 0.3%. Platinum is on track for a weekly gain of nearly 8%, while palladium recorded a slight increase.

In Asia, Thai households are preparing to buy more gold for the fifth consecutive year, as the rising local currency has made bullion relatively affordable. This complicates the central bank's efforts to curb the impact of the precious metal on the baht currency.