Hot commodity: Gold bullion in Singapore. Gold has surged by more than a quarter this year, supported by the Fed’s path to monetary easing. — Reuters
NEW YORK: Gold rose to another record high, building on last Thursday’s surge of nearly 2% as traders added bullish wagers ahead of a widely expected US Federal Reserve (Fed) interest-rate cut this week.
Bullion climbed as much as 1% to US$2,583.45 an ounce last Friday, putting it on track for a weekly gain of more than 3%.
Gold has surged by more than a quarter this year, supported by the Fed’s path to monetary easing.
Central-bank buying and strong haven demand due to conflicts in the Middle East and Ukraine have helped the advance, while interest from retail investors is also picking up.
Swap traders increased the possibility a jumbo cut by the US central bank at its meeting Wednesday after a Wall Street Journal report last Thursday that Fed policymakers were considering whether to reduce rates by a regular quarter point or opt for half a percentage point cut.
In response, bullion traders are betting prices of the precious metal can go even higher since lower rates are generally positive for non-interest yielding gold.
Total open interest in Comex gold futures jumped for the past couple of trading sessions, while prices advanced to hit successive records, indicating fresh long positions were being built.
Gold’s rally to fresh highs is associated with a large bet on a 50 basis point cut hitting the tapes, said Daniel Ghali, senior market strategist at TD Securities.
Some investors are also using gold as a safe play in a risk-on environment, according to Bob Haberkorn, senior market strategist at RJO Futures.
He pointed to small pickups in US inflation readings as well as soft labour-market report last week that investors may want to safeguard their wealth in gold in case the economy tilts into a recession.
Investors closing out bearish wagers on gold may have also contributed to the ascent.
Money managers’ gross short positions in Comex gold futures stood at the highest in four weeks in the week ending Sept 3, according to the latest data.
Expectations of monetary easing by global central banks have also boosted investor holdings of gold exchange-traded funds (ETFs), which were a key driver in gold’s rally to a then all-time high at the peak of the pandemic.
Total gold ETFs holdings are 0.3% higher this month, after recording three straight months of increase since June, according to data compiled by Bloomberg.
ETF investors largely remained net sellers for the past three years.
“It’s an indication that western investors are continuing to show renewed signs of interest in gold, something that has been largely absent over the past three years, at least via ETFs,” John Reade, chief market strategist at the World Gold Council, said in a social media post on X.
Spot gold rose 0.8% to US$2,578.56 in New York. The Bloomberg Dollar Spot Index fell 0.4%, adding to losses in the previous session. Silver, platinum and palladium rose. — Bloomberg
