On Tuesday, gold prices soared to an all-time high, with the spot price of gold reaching $2,465.65 an ounce by the afternoon, as per data from LSEG that dates back to 1968. Gold futures also saw a significant increase, up 1.7% to approximately $2,470 an ounce. This surge in gold prices is largely attributed to investors anticipating potential interest rate cuts by the Federal Reserve starting this fall.
The spike in interest towards gold was catalyzed by unexpectedly low inflation figures in June, which have set the stage for the Federal Reserve to potentially lower its benchmark interest rate in September. Lower interest rates generally make gold more appealing compared to yield-bearing assets like Treasuries since gold does not offer dividends. This makes the metal an attractive option for investors looking for stability amid economic and geopolitical uncertainties.
According to the CME FedWatch Tool, which predicts changes in interest rates based on 30-day fed funds futures, a rate cut in September is now viewed as highly probable, with further cuts anticipated thereafter.
In 2024, gold has emerged as one of the top-performing global assets. This performance is significantly supported by central banks, which have been active buyers of gold. The World Gold Council reports that global official gold reserves increased by 290 metric tons in the first quarter of the year, marking the largest increase for a first quarter since at least 2000 and a 69% rise over the five-year quarterly average. This robust central bank activity underscores the growing reliance on gold as a key asset in national reserves.
