Gold prices rose in the European market on Tuesday, extending gains for the third consecutive day and continuing to break record highs, approaching the $3,700 per ounce barrier for the first time in history, supported by the current decline in US dollar levels.
A series of weak data on the US labor market has increased expectations that the Federal Reserve will deliver deeper interest rate cuts. To reprice those expectations, investors are awaiting the release of key US inflation data this week.
Price Overview
• Gold prices today: Gold rose by 0.65% to ($3,659.41), the highest level ever, from the opening price of ($3,636.47), recording the lowest level at ($3,628.44).
• At Monday’s settlement, gold prices rose by 1.4%, marking the second consecutive daily gain, after surpassing the $3,600 per ounce barrier for the first time in history.
US Dollar
The dollar index fell on Tuesday by about 0.1%, deepening losses for the third consecutive session, recording the lowest level in seven weeks at 97.26 points, reflecting the continued decline of the US currency against a basket of major and minor counterparts.
This decline comes amid ongoing selling of the US dollar, especially after recent US data showed further deterioration in the labor market, reinforcing expectations that the Federal Reserve will deliver deeper interest rate cuts.
US Interest Rates
• According to the CME FedWatch tool, the probability of a 25-basis-point US interest rate cut at the September meeting is currently priced at 100%, with a 12% chance of a 50-basis-point cut.
• The probability of a 25-basis-point cut at the October meeting is also currently priced at 100%, with a 10% chance of a 50-basis-point cut.
• To reaffirm the above pricing, investors are awaiting the release of key US inflation data for August this week, ahead of next week’s Federal Reserve meeting.
Gold Performance Outlook
• Han Tan, Chief Market Analyst at Nymo Money, said: Market optimists have drawn momentum from conviction about interest rate cuts, which pushed gold to new record highs.
• Tan added: The weakness of the dollar has also paved the way for trading above $3,600, while bullion-backed flows and central bank purchases reinforce a strong mix of supportive factors.
• Tan explained: We may see spot gold approach $3,700 this week if markets witness sharply downward revisions to US jobs data and shockingly low CPI data.
• Tan said: Gold markets are likely to reserve their biggest reaction for prices until the latest policy signals emerge from next week’s Federal Open Market Committee meeting.
SPDR Fund
Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell on Monday by about 2.29 metric tons, bringing the total down to 979.68 metric tons, the lowest since August 29.
