The London gold price index showed the precious metal hit an all-time high of $2,521.55 (1,935 pounds) an ounce in Tuesday morning’s auction.
The London Bullion Market Association (LBMA) announced that the price of gold (GC=F) surpassed the $2,500 mark for the first time in over 100 years in an auction on Monday morning, closing at $2,500.05 per ounce.
Precious metals extended gains in Tuesday morning auctions as investors waited for further clues about when the U.S. Federal Reserve plans to cut interest rates.
Minutes from the Federal Reserve’s July interest rate meeting are due to be released on Wednesday, and investors will be scrutinizing them for signs the central bank plans to cut interest rates.
The main focus for investors this week will be Federal Reserve Chairman Jerome Powell’s speech on Friday at the Jackson Hole Symposium, an annual central banking conference.
Recent economic data has fueled expectations that the Fed will soon cut interest rates from their 23-year high of 5.3%, with a majority of economists polled by Reuters expecting the central bank to announce three 25-basis-point rate cuts by the end of the year.
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A weaker-than-expected July jobs report has stoked fears of a recession and raised concerns that the Fed may be late in cutting interest rates. Last week’s closely watched U.S. inflation report showed that consumer prices rose 2.9% in July, slowing from 3% in June, reinforcing market speculation that a rate cut is imminent.
Gold prices rose as the prospect of an interest rate cut by the Federal Reserve made the non-yielding precious metal more attractive to investors.
“Economic and geopolitical uncertainty in recent years has helped drive gold prices higher, but in reality central banks have been buying gold and gold ETFs have been experiencing outflows for several years,” said Laith Khalaf, head of investment analysis at investment platform AJ Bell.
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He added: “Central banks are attracted to gold because it is liquid, has no credit risk and is not subject to geopolitical interference.”
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According to data provided by AJ Bell, iShares Physical Gold ETC (SGLNL.XC) (an exchange-traded product) has generated a real return of 24.8% over a three-year period, outperforming other assets such as Bitcoin (BTC-USD) and global index trackers when looking at the Fidelity Index World Tracker.
Analysts at UBS predicted that gold prices could reach $2,600 an ounce by the end of 2024.
“Gold behaves differently from other asset classes and so is still worth considering as a portfolio diversifier, but it should not make up more than 5-10% of a portfolio, maximum,” Khalife said.
“Gold is known as a safe haven, but it is also volatile and has had long periods of below-inflation returns despite its reputation as an inflation hedge.”
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