Gold prices slipped slightly in Asian trading on Monday but remained close to record highs around $2,500 per ounce. This follows a strong performance in August, with bullion prices climbing by about 2.8%. A mix of safe-haven demand and expectations for interest rate cuts has pushed the precious metal towards these unprecedented levels.
As of 09:20 GMT, spot gold (XAU/USD) was trading at $2,498.82 per ounce, holding steady near the all-time high of $2,531.72 per ounce reached last month.
Several factors have driven the sustained demand for gold. Geopolitical tensions in the Middle East have led investors to seek safety in gold, while a downturn in riskier markets at the beginning of the month also supported demand. Additionally, steady buying by central banks, especially in emerging markets, has provided further support for prices.
However, the most significant factor boosting gold’s recent gains has been the anticipation of lower interest rates in the US. A more favourable interest rate environment tends to benefit gold, as lower rates reduce the opportunity cost of holding non-yielding assets like bullion.
Economic data released last Friday showed the personal consumption expenditures (PCE) price index, a key inflation gauge monitored by the Federal Reserve, rose by 0.2% in July following an unrevised 0.1% increase in June. These figures matched economists’ expectations and suggest that the Federal Reserve might lower interest rates by at least 25 basis points in its September meeting.
For the 12 months through July, the PCE price index increased by 2.5%, the same rate as in June, and slightly below the 2.6% gain forecast by economists surveyed by Reuters. When excluding the more volatile food and energy prices, the core PCE price index also increased by 0.2% in July, aligning with the rise in June.
With inflation appearing to remain stable and economic indicators showing signs of slowing, there is growing anticipation among market participants that the Federal Reserve will initiate its monetary easing policy this month. This expectation continues to support gold, keeping it near its historic highs amid ongoing global economic uncertainty.
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