Market expectations for a Federal Reserve rate cut in September, combined with the recent assassination attempt on Donald Trump, drove gold prices higher on Tuesday, nearing their all-time high.
As of now, spot gold prices have risen by 0.68%, reaching $2,438.76 per ounce, just shy of the historical peak of $2,449.89 set on May 20.
Earlier this year, gold prices hit record highs in April and May but fell back in June due to cooling rate cut expectations and weakened physical demand at high prices.
Federal Reserve Chairman Jerome Powell remarked on Monday that three U.S. inflation reports from the second quarter have "somewhat increased confidence" that the pace of inflation might slow.
This statement has further solidified expectations for a rate cut, with investors awaiting more U.S. economic data for additional monetary policy signals.
WisdomTree commodities strategist Nitesh Shah suggested, according to media reports, that the uncertainty surrounding the prolonged anticipation of a U.S. rate cut might lead to weak gold prices in the third quarter before a faster rebound, potentially pushing prices to new highs.
As the rate cut expectations draw closer, another key demand category, gold ETFs, has seen inflows after three years of outflows. According to the World Gold Council, gold ETFs saw an inflow of $500 million, or 7.6 tons, last week.
Additionally, the assassination attempt on former U.S. President Donald Trump has added to political uncertainty, further boosting the safe-haven demand for precious metals.
GraniteShares Chief Revenue Officer Paul Marino stated that during times of uncertainty and volatility, people tend to invest in gold, which is the current scenario. He noted that people continue to see gold as a safe haven and a store of value. While price predictions are challenging to make accurately, it appears that prices are steadily rising.
Huatai Securities opined that when both the "Trump trade" and "rate cut trade" strengthen simultaneously, the "weak resonance" is favorable for U.S. large-cap tech stocks, Japanese stocks, and steel assets. In the case of "strong resonance," assets like Bitcoin and gold might be favored, and the U.S. Treasury yield curve could become steeper.
