Gold breaks to new all-time highs on Thursday
LONDON (September 26) Gold (XAU/USD) trades higher, breaking above the previous record highs and reaching a new all-time high of $2,673 per troy ounce on Thursday. Falling global interest rates, an escalation of the conflict in the Middle East, and a weaker US Dollar (USD) due to increased odds of the US Federal Reserve (Fed) continuing with its aggressive monetary easing strategy.
Gold breaks to record highs
Gold rallies to a new record high of $2,673 on Thursday. The decisions by the People’s Bank of China (PBoC), Swedish Riksbank and Central Bank of Czech Republic to slash interest rates over recent days is advantageous for Gold as it lowers the opportunity cost of holding the non-interest-paying asset, making it more attractive to investors.
A further upside factor is the escalation of the conflict between Israel and Hezbollah. On Wednesday, amid continued missile exchanges between the two enemies, the head of the Israeli Defence Forces, Herzi Halevi, told his troops in northern Israel that they should prepare for a ground offensive on Lebanon. If such an invasion should take place, it will further ratchet up risk aversion and increase safe-haven flows into the yellow metal.
Gold rallies on rising expectations of a 50 bps cut from the Federal Reserve
Although higher-than-expected US New Home Sales data for August and robust Mortgage Applications on Wednesday did not add any evidence that the US economy is heading for a hard landing, markets continue to price in another stimulatory 50 basis point (bps) (0.50%) interest rate cut from the Federal Reserve (Fed) at its November meeting. Labor market data may be more important in this regard, and Jobless Claims data out on Thursday could impact both USD and Gold.
Market-based probabilities of a jumbo 50 bps cut, according to the CME FedWatch tool, remain above 60%, which is higher than the alternative – a modest 25 bps reduction. This keeps pressure on the US Dollar and adds a further tailwind to Gold, which is mainly priced and traded in USD.
Data on Tuesday confirmed investors' worst fears after the Conference Board Consumer Confidence Index fell to 98.7 in September from an upwardly revised 105.6 in August. The result was well below consensus estimates. Labor market concerns voiced by survey respondents were a major factor.
Gold may also be holding its highs after Fed Governor Adriana Kugler (voting member) delivered a relatively dovish speech on Wednesday. Kugler's comments scored a 3.2 on FXStreet’s FedTracker, which gauges the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10, using a custom AI model.
Fed Chairman Jerome Powell is scheduled to speak on Thursday and could impact market expectations regarding Fed policy with implications for Gold price.
FXStreet
