Gold has soared to an all-time high above $3,500 per ounce, extending its winning streak to its sixth straight meeting as investors bet on the cutback of soon-to-be-lower U.S. interest rates and bother with the political threat of central bank independence.
Spot gold climbed to $3,508.73 earlier on Tuesday before returning to $3,496.40, still up 0.57%. U.S. gold futures delivered 1.4% in December to $3,564.40 per ounce.
According to CME FedWatch tools, traders are now seeing an 89.7% chance of reducing the Fed rate by 25 basics at the Sept. 17 meeting. Lower interest rates reduce the opportunity cost of holding non-income assets such as gold, making metals more attractive to investors.
The rally was based on months of momentum driven by safe haven demand, as market volatility, inflationary pressures and geopolitical tensions fueled appetite for gold bars.
The latest surge has also raised concerns about the Fed’s independence. European Central Bank President Christine Lagarde warned that if U.S. President Donald Trump risked “very serious” damage to the U.S. and the global economy, he would fire Fed Chairman Jerome Powell or Governor Lisa Cook.
Trump has repeatedly clashed with the Fed, demanding a deeper reduction in tax rates and questioning its handling of inflation. Any attempt to evacuate senior Fed officials will rattle further, heightening demand for safe assets such as gold, analysts say.
The perfect storm of gold bars
Analysts believe that as interest rates are expected to fall, inflation will still rise and political uncertainty will become more stable, these conditions have matured to obtain further gold returns. Now, some market strategists predict that if the Fed cuts at a rate, it will take $3,600 per ounce in the next few weeks.
For investors and businesses, the latest milestone highlights the ongoing role of gold in hedging economic and political turmoil – when confidence in the global monetary order was tested.
