Gold prices reached a record high on Tuesday, with futures climbing 1.5% to $2,465.30, surpassing the previous high of $2,454.20 set in May. Spot gold also hit an all-time high of $2,465.19 during the session. The surge in gold prices can be attributed to the growing expectations of an interest rate cut in September, which has fueled demand for the precious metal.
The likelihood of a September interest rate cut has increased after June’s softer inflation data and dovish comments from Federal Reserve Chair Jerome Powell. As a result, markets are now pricing in a 100% chance of a rate cut next month. This has bolstered investor interest in gold as a safe haven asset, pushing prices to new heights.
Weakening Dollar and Central Bank Buying
A weakening U.S. dollar has also contributed to the surge in gold prices. The dollar rebounded on Tuesday after hitting a five-week low, further supporting demand for bullion. Additionally, central banks around the world have been increasing their purchases of gold, with UBS reporting that central bank buying is at its highest level since the late 1960s. Many central banks are diversifying away from USD- and EUR-denominated assets, opting to stock up on gold instead.
Despite the recent rally in gold prices, experts believe that there is still room for further upside. UBS strategist Joni Teves noted that the market is hovering just above the $2,400 level and that there is potential for the price to rise. With investors showing interest in building gold exposure and positioning remaining lean, the outlook for gold prices remains positive.
In addition to the surge in gold prices, gold mining stocks have also experienced gains. The VanEck Gold Miners ETF rose 3% on Tuesday, marking its fifth winning day in six sessions. The U.S.-listed shares of Harmony Gold and Gold Fields saw significant gains as well, with Harmony Gold rising 16% and Gold Fields climbing 6%.
The record-breaking surge in gold prices can be attributed to the speculation of an interest rate cut in September, alongside a weakening dollar and increased central bank buying. The outlook for gold prices remains positive, with experts believing that there is still room for further growth. As investors continue to show interest in gold as a safe haven asset, gold prices are expected to remain elevated in the coming months.