Gold hits record price amid US rate cut and Middle East tensions

Gold broke through the $2,600 level on Friday for the first time, boosted by bets on further US interest rate cuts and rising tensions in the Middle East.
Following the Federal Reserve’s mid-week 50 basis point rate reduction the precious metal hit a new record of $2,588 per troy ounce on Thursday, and on Friday it added a further 1 per cent to hit a further new high of $2,639.40.
Prices of the safe-haven asset, even though it pays no interest, have risen almost 4 per cent this month and by 26 per cent so far this year, the biggest annual rise since 2010, as investors also sought to hedge uncertainties spurred by prolonged conflicts in the Middle East and elsewhere.
Goldman Sachs has forecast that the gold price could reach as high as $2,700 by early 2025, buoyed by possible interest rate cuts in America and higher gold purchases by emerging markets’ central banks.
Commerzbank said in a note that the record rally in the gold price “should not go on for ever,” citing the expectation for rate cuts of only 25 basis points each at the Fed’s next two meetings.
Ryan McIntyre, senior portfolio manager at Sprott Asset Management, a specialist in metals and minerals investments, said: “We remain very positive on gold, as it is significantly under-owned in the western world and is one of the few assets that can counter the many fiscal threats that currently exist.
“Beyond rate cuts, gold will also benefit from the ongoing debasement of the US dollar, the precarious fiscal situations of many western nations, and the global desire for a store of value independent of other assets and institutions.”
India’s gold imports rose to their highest level on record by dollar value in August at $10.1 billion, according to government data this week.
Since Russia’s invasion of Ukraine in 2022, central banks have been buying gold at roughly three times the rate they did previously. The Chinese central bank has been building its physical gold position over the past two years in an attempt to diversify its reserves funds, with net purchases of 7.23 million ounces last year alone, according to the World Gold Council.
“The market is factoring in bigger and more rate cuts because we have both fiscal and trade deficits, and that’s going to further weaken the overall value of the dollar,” Alex Ebkarian, chief operating officer at Allegiance Gold, a financial adviser, said.
“If you combine geopolitical risks with the current deficit that we have, along with the low yielding environment and weaker dollar, the combination of all these is what’s leading to gold’s rally.”