Gold prices rose to a record high on Monday (September 8th), breaking through the key $3,600 level after weak US employment data reinforced expectations of an interest rate cut by the US Federal Reserve at its meeting next week.

Spot gold prices rose 0.7% to $3,612.20 per ounce, as of 08:41 GMT. Bullion prices rose to a record high of $3,616.64 earlier in the session. Bullion prices have surged 37% so far this year, extending their 27% rise in 2024, driven by a weaker dollar, strong central bank buying, a weak monetary policy environment, and geopolitical and economic uncertainty.

US gold futures for December delivery were unchanged at $3,653.10. US job growth weakened sharply in August, data showed on Friday, and the unemployment rate rose to a nearly four-year high of 4.3%. This confirms that labor market conditions are weakening and strengthens the case for a Fed rate cut next week.

(The rate cut bets) are driving demand for gold. "Furthermore, the overall geopolitical scenario is highly uncertain. We must consider that a significant portion of demand also comes from central bank purchases," said Carlo Alberto De Casa, an external analyst at Swissquote.

Traders have priced in a 90% chance of a 25 basis point rate cut this month, according to the CME FedWatch tool. Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

"We expect gold to rise to $3,700/oz by the middle of next year," said UBS analyst Giovanni Staunovo. Meanwhile, the benchmark 10-year US Treasury yield is near a five-month low.

The focus now shifts to the US inflation report, due on Thursday, which could provide further clarity on the magnitude of the Fed's expected rate cut. StoneX analyst Rhona O'Connell added that gold's continued momentum is "supported by CTA activity."

Gold speculators increased their net long positions by 20,740 contracts to 168,862 in the week ending September 2. Elsewhere, spot silver rose 0.3% to $41.08 per ounce. Platinum rose 1.6% to $1,394.90, and palladium rose 1.3% to $1,124.24. (alg)

Source: Reuters