Gold surged past $3,700 an ounce for the first time on Tuesday as rising bets on a Federal Reserve rate cut this week fueled a rally fueled by safe-haven demand, central bank buying, and a weaker dollar.
Spot gold rose 0.3% to $3,690.59 an ounce, as of 10:49 a.m. ET (1449 GMT), after hitting a record high of $3,702.95 earlier in the session. U.S. gold futures for December delivery rose 0.2% to $3,727.50.
"Global growth uncertainty and geopolitical risks continue to keep safe-haven demand high, but gold's rally is largely driven by anticipation of aggressive interest rate cuts from the Federal Reserve," said Zain Vawda, analyst at MarketPulse by OANDA.
Traders are expecting a near-certain 25 basis point rate cut at the conclusion of the two-day meeting on September 17, with a smaller chance of a 50 basis point cut, according to the CME FedWatch tool. US President Donald Trump urged Fed Chairman Powell in a social media post on Monday to implement a "bigger" rate cut. Non-yielding gold bullion tends to perform well in a low interest rate environment.
The dollar fell to its lowest level in more than two months against a basket of major currencies. A weaker dollar makes gold cheaper for holders of other currencies. "Gold jumped on the back of a sharply weaker dollar, which is at a low level not seen since July," said Tai Wong, an independent metals trader.
"However, caution is likely to prevail ahead of tomorrow's key Fed decision, so some profit-taking should not be surprising." Bullion, known as a hedge against uncertainty, has surged about 41% since the start of the year. Gold prices broke through $3,600 an ounce on September 8.
Analysts say the rally is being driven by a potent combination of sustained central bank buying, rising safe-haven inflows, and a global shift away from the US dollar, which is also facing continued weakness.
Spot gold surged 27% in 2024 and broke through the $3,000 mark for the first time in March, as uncertainty over Trump's trade policies drove investors to the safe-haven asset.
Elsewhere, spot silver fell 0.2% to $42.64 an ounce, after hitting its highest level since September 2011 earlier in the session.
Platinum fell 0.5% to $1,394.00, and palladium weakened 0.5% to $1,178.14. (alg)
Source: Reuters
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