Gold hits new all-time high as traders brush off Fed’s caution
Gold prices surged to a fresh record on Tuesday, reaching $3,749.27 per ounce in Asian trading, as investors looked past the Federal Reserve’s cautious signals following last week’s interest rate cut.
The precious metal extended its rally from the past two sessions, both of which also saw record highs, News.Az reports, citing Bloomberg.
Investors have piled into exchange-traded funds — with holdings expanding at the fastest pace in more than three years on Friday — following a brief dip in prices last week as Fed Chair Jerome Powell curbed expectations for rapid easing, after the central bank reduced rates on Wednesday. Lower rates benefit typically benefit non-interest bearing precious metals.
“After pulling back the day after the Fed’s 25 basis-point rate cut — potentially on some perceived caution in Powell’s FOMC comments — new upward momentum has taken root with ETF inflows still the driving force,” BMO Capital Markets analysts including Helen Amos and George Heppel said in a note late Monday. “With a rate-cutting cycle firmly on the table we think risk-reward remains positive for prices into” the fourth quarter.
Powell is due to give a highly anticipated speech on the economic outlook later on Tuesday, after the quarterly rate forecasts that accompanied last week’s rate decision — known as the dot plot — showed a wide dispersion of views. Meanwhile, several Fed officials on Monday reiterated the need for taking a cautious approach to rate decisions moving forward, including St. Louis Fed President Alberto Musalem who said that he sees limited room for more reductions amid elevated price pressures.
Silver, meanwhile, held a three-day rally near $44 an ounce. The cheaper precious metal has seen possible support from bullish options trades, with the daily volume of IShares Silver Trust options surging to 1.2 million on Friday — the highest since April 2024, with call options also spiking.
Gold and silver have been among the year’s best-performing major commodities on a broad confluence of supportive factors, as the Fed eases monetary policy, central banks bolster their reserve holdings, and lingering geopolitical tensions sustain a bid for havens. Major banks including Goldman Sachs Group Inc. have flagged their expectations for further gains.
Looking ahead, traders will parse incoming data this week, including Friday’s US personal consumption expenditures price index. The Fed’s preferred measure of underlying inflation likely grew at a slower pace last month, which would boost the argument for rate cuts.
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