Gold At Record Highs

Gold At Record Highs by Andrew Blumer last updated on October 03, 2024

Gold (Xau/Usd) At Record Highs On Bigger Rate Cut Hopes

Gold (XAU/USD) is trading at record highs on Tuesday amid hopes that the Federal Reserve will deliver a bigger-than-expected rate cut.

Earlier, the US central bank was expected to deliver a 25 bps rate cut, but that has now changed to 50 bps. So, it makes sense for the Gold (XAU/USD) to turn higher as a deeper rate cut will be beneficial for it.

Gold (Xau/Usd) Down By 0.2%

While the Gold (XAU/USD) is gaining strength, the US Dollar and the bond yields are trending lower. As of now, Gold (XAU/USD) is trading near $2578 with a -0.2% change, while the Gold Futures (December) are trading at $2605 with a -0.1% change.

Although Gold (XAU/USD) prices are marginally lower, they are still at record highs. In fact, Gold (XAU/USD) has already touched $2589 which was the high for the day.

The US Central Bank meeting will be held on Wednesday, which means there's still a two-day gap. Right now, there's a 68% chance that the US central bank will cut the rates by 50 bps. Conversely, there's only a 32% chance that the central bank will cut the rates by 25 bps.

The overall environment is becoming ideal for gold as the rates will go down along with bond yields. This fundamental shift will make Gold a worthwhile investment as more traders will be flocking towards it instead of US Dollar and bond yields.

Another factor that has played in favor of the Gold (XAU/USD) is the buying from the central banks around the world. Central banks, especially the emerging banks, have increased their buying of gold bullion.

Given the upcoming rate cuts from the ECB, BoE, and the Federal Reserve, it seems that Gold (XAU/USD) will be at a much higher price by the end of the year 2024.

In fact, a boost in the gold (XAU/USD) is also expected if the US central bank delivers a 50 bps rate cut this Wednesday.