Gold prices surged to a record high on Tuesday, with gold futures climbing 1.5% to $2,465.30. This jump surpassed the previous peak of $2,454.20 reached in May. Spot gold also hit an all-time high of $2,465.19 during the session. This increase in prices was largely driven by the growing anticipation of a September interest rate cut by the Federal Reserve.
In addition to the expectations of a rate cut, a weakening U.S. dollar also contributed to the surge in gold prices. The greenback rebounded slightly on Tuesday after hitting a five-week low. The combination of dovish comments from Federal Reserve Chair Jerome Powell and softer inflation data in June has further bolstered interest in gold as a safe haven asset.
Gold prices have been on an upward trajectory since the first half of 2024, fueled by increased demand from central banks worldwide. Central bank buying of gold is at its highest level since the late 1960s. Many central banks are now diversifying their reserves away from USD- and EUR-denominated assets and turning to gold due to global geopolitical uncertainties.
UBS strategist Joni Teves has expressed optimism about the future of gold prices, stating that the market is likely to rally further. With a 100% probability of a rate cut in September, investors are showing a strong interest in buying gold. Gold mining stocks have also seen gains, with the VanEck Gold Miners ETF up 3% and shares of companies like Harmony Gold and Gold Fields on the rise.
The record highs in gold prices can be attributed to a combination of factors including the anticipation of a rate cut, a weakening dollar, central bank demand, and rising geopolitical risks. The outlook for gold remains positive as investors continue to show interest in the precious metal as a hedge against market uncertainties.