Gold prices hit a record high on Tuesday as investors continued to flock to the precious metal ahead of an expected interest rate cut from the Federal Reserve in September.
Spot gold surged above $2,525 an ounce on Tuesday, while gold futures for December delivery (GC=F) rose above $2,560 an ounce.
Central bank gold purchases hit a record high in the first quarter of 2024, helping to bolster prices this year, while geopolitical tensions continue to keep investors turning to the precious metal as a safe haven asset.
Gold futures are up more than 23% so far this year, making it one of the best-performing metals this year.
“We expect gold prices to rise to $2,600 an ounce by the end of 2024, driven by robust demand from central banks and increased trading in exchange-traded funds,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.
The next catalyst for gold prices is expected to come on Friday, when Federal Reserve Chairman Jerome Powell speaks at the Jackson Hole Economic Symposium. Investors will be looking for clues as to whether the Fed will lock in interest rate cuts next month.
As of Tuesday, traders were pricing in a 71.5% chance that the Fed would cut interest rates by 0.25% on Sept. 18, according to the CME FedWatch tool. The chance of a 0.50% cut was nearly 28%.
Physically-backed global gold ETFs saw inflows for a third consecutive month as Western investors flocked to the metal, with North American activity outpacing Europe and Asia in July.
“This is primarily due to the expectation that rate cuts are likely coming,” Joseph Cavatoni, senior market strategist at the World Gold Council, told Yahoo Finance on Tuesday.
“We are seeing momentum, the tactical driver in the gold market. There are large net long positions in that area.”
Global gold ETFs recorded inflows for the third consecutive month, led by purchases in Europe and the US. North America led global activity in July. (Source: World Gold Council) (World Gold Council)
“Gold is no longer competing with bonds [or] “When you take inflation into account and look at real returns, CD yield growth has far outpaced gold,” Alex Evkarian, co-founder and COO of Allegiance Gold, told Yahoo Finance.
Still, Evkarian expects profit-taking dragging stock prices down between now and the end of the year could weigh on further price gains.
“It would be healthy for us to withdraw in some form,” Ebkarian said.
“This is the seventh time gold has reached a new all-time high since the beginning of April, but each time it has been met with profit-taking.”
Inés Ferré is a senior business reporter at Yahoo Finance. Follow her on X. Follow.
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