XAU/USD: Gold Rockets to Record Above $2,500 on Bright Rate-Cut Prospects, Weak Dollar
Precious Metal Surpasses $2,500 for the First Time as Traders Bet on Interest Rate Cuts
• Gold prices XAUUSD surged past $2,500 for the first time in history, driven by increased bets on anticipated interest rate cuts by the Federal Reserve. The yellow metal climbed by 2.3%, or $56, on Friday, reaching a record high of $2,510 per ounce, surpassing its previous peak of $2,485 set on July 17. The drop in the US dollar, which fell for the fourth consecutive week, also contributed to the rise in gold prices.
• The upward momentum in gold prices is fueled by a series of positive economic reports from the US. Strong retail sales data reinforced the narrative that the Federal Reserve might consider rate cuts. Prior to that, the consumer price index report indicated that inflation was easing as expected, with a 2.9% increase in July. The economy appears to be performing well, with consumer spending showing no signs of slowing down and inflationary pressures continuing to decline.
• This environment is highly favorable for gold. The precious metal is particularly sensitive to interest rate cuts, which are expected to be discussed when the Fed meets in September. As a non-yielding asset, gold becomes more attractive when interest rates fall, as it reduces the opportunity cost of holding it. Additionally, lower rates make the US dollar less appealing, as it offers lower returns on deposits.
