Gold prices edged closer to record highs on Wednesday, boosted by a pullback in U.S. Treasury yields and growing expectations of rate cuts by central banks. Spot gold rose 0.5% to $2,673.77 per ounce by mid-morning in New York, approaching the record high of $2,685.42 set in late September. U.S. gold futures also saw gains, increasing 0.4% to $2,690.50.
The rally in gold prices comes as traders increasingly anticipate a 25-basis-point rate cut by the U.S. Federal Reserve in November, a move expected to further support the precious metal. According to Peter A. Grant, vice president and senior metals strategist at Zaner Metals, "Weaker inflation data in Europe and the UK have also heightened expectations for more aggressive rate cuts from the European Central Bank (ECB) and the Bank of England (BoE), leading to generally lower yields which have lifted gold."
Grant added that gold could reach $3,000 by the first quarter of 2025, driven by continued demand for safe-haven assets amid geopolitical tensions, economic uncertainty, and central bank policy shifts. The decline in U.S. Treasury yields, which fell to their lowest levels in over a week, has made gold more attractive as it typically performs well in a low-interest-rate environment.
The market is pricing in a nearly 96% probability of a U.S. rate cut in November, according to data from the CME FedWatch tool. Meanwhile, the ECB is widely expected to announce a rate reduction on Thursday, while the BoE is also anticipated to follow suit next month after a drop in UK inflation. These moves are part of broader efforts by central banks to support their economies as inflationary pressures begin to ease.
Ole Hansen, head of commodity strategy at Saxo Bank, highlighted several bullish drivers for gold, including fiscal instability, geopolitical tensions, and the growing trend of de-dollarization. He also pointed to uncertainties surrounding the U.S. presidential election as another factor likely to influence gold prices. "Safe-haven demand remains strong as investors look to hedge against a variety of risks, from geopolitical conflicts to economic policy changes," Hansen said.
At the London Bullion Market Association (LBMA) annual conference, delegates predicted that gold prices could rise to $2,941 per ounce over the next 12 months. The survey, conducted among traders, refiners, and miners, also forecasted a significant increase in silver prices, projecting a jump to $45 per ounce-more than 40% above current levels.
Silver prices saw an uptick of about 1% to $31.77 per ounce on Wednesday, while other precious metals also gained. Platinum rose 1.3% to $996.55 per ounce, and palladium climbed 1% to $1,019.00. The LBMA survey reflects a bullish sentiment across the industry, with participants expecting strong performances from precious metals amid an evolving economic landscape.
Adam Button, head of currency strategy at Forexlive.com, noted gold's resilience in the face of a stronger U.S. dollar and rising bond yields earlier in the week. "The gold market didn't get any good news this week, not that I can see. The news flow was dollar-positive and bonds sold off, yet gold held in there. It started out weak early in the week but has finished near flat, which is a win in a tough week for news," Button said. He cautioned that while gold's strength is encouraging, the sustainability of these gains remains uncertain.
Meanwhile, the geopolitical landscape continues to play a critical role in gold's momentum. Ongoing conflicts and tensions have heightened safe-haven demand, as investors seek to protect their portfolios against volatility. In addition to geopolitical factors, concerns around fiscal stability and central bank policies are expected to keep gold prices elevated in the near term.
China's economic performance also remains a focal point for gold traders. Recent stimulus measures from Beijing have not been sufficient to sustain rallies in the country's stock markets, leading to a retreat in the MCHI ETF, which has now lost more than half of its gains since early September. Analysts suggest that this could drive Chinese investors back into gold as they seek more stable assets amidst uncertainty in other markets.
