Markets: Why is Gold the Star Today?

The Charm of Gold in Today’s Markets

Gold is shining bright and taking the lead in the markets today.
Bullion prices have continued to hit new records, driven by the increasing belief that the Federal Reserve will cut interest rates in September following Jerome Powell’s comments.

In detail, the spot price of gold has risen by 0.5% to $2,482.29 per ounce, reaching a historical peak according to LSEG data.
Gold futures have increased to $2,478.4 per ounce.
Despite a slight dip at the time of writing compared to the peak levels during Asian trading, gold remains on a strengthening trend.

Why the Gold Rush?

This year, gold prices have surged by almost 20%, supported by significant purchases by central banks, strong consumer demand in China, and the desire for safe-haven assets amid geopolitical tensions.

Monday, Powell stated that the Fed won’t wait for inflation to reach the 2% target before starting to cut rates.
This has spread optimism among market observers.
According to the CME FedWatch tool, traders are convinced that the Fed will cut rates by September.
With falling interest rates, gold tends to become more attractive compared to fixed-income assets like bonds.

In recent months, gold prices have reached new highs due to its appeal as a safe-haven asset amidst growing tensions in the Middle East and central banks’ gold purchases.

“It’s worth highlighting gold’s ability to find support under any condition this year,” said Vivek Dhar, director of mining and energy commodities research at the Commonwealth Bank of Australia.

After stronger-than-expected US retail sales triggered a brief sell-off on Tuesday, traders added long positions on the precious metal, helping to drive a rebound and attract even more inflows, according to Chris Weston, head of research at Pepperstone Group Ltd.

“The fundamentals have clearly shifted to offer investors more reasons to reconsider gold holdings in the portfolio, and this has led price-sensitive funds to chase the uptrend,” Weston wrote in a Wednesday note.
“With broad positioning and sentiment not close to extremes, $2,500 could be tested fairly soon.”

Meanwhile, markets have been assessing the financial and political implications of the attempted assassination of Donald Trump over the weekend, as his presidential candidacy gains momentum.
A return of Trump to the White House could strengthen gold’s safe-haven status if global trade tensions were to escalate in response to proposed higher tariffs.