Gold prices have surged close to record highs driven by weak US jobs data and expectations of interest rate cuts by the Federal Reserve. Spot gold is trading at $3,586 per ounce in the international market, and has appreciated by 37% year-to-date. A weaker dollar and purchases by central banks are also contributing to the rally.
Gold Price Today: Gold prices remained stable near record levels in the international market on Monday. The prospect of interest rate cuts by the US Federal Reserve in September has boosted investor demand. Spot gold is trading at $3,586.81 per ounce, after reaching an all-time high of $3,599.89 on Friday. Weak US employment data, a weaker dollar, and consistent buying by central banks have supported gold prices. Gold has appreciated by 37% year-to-date, while silver has fallen by 0.5% to $40.75 per ounce.
Why Gold is Rallying Sharply
The primary reason for the surge in gold prices is attributed to the US jobs data. Job growth in August was extremely weak, and the unemployment rate rose to 4.3 percent, the highest level in four years.
Kyle Rodda, a financial analyst at Capital.com, stated that investors now anticipate the Federal Reserve might cut interest rates by as much as 50 basis points in September. While the probability is low, it represents a significant shift compared to previous expectations. According to Rodda, the current environment is highly favorable for gold. If there are no major inflation shocks, gold could surpass the $3,600 per ounce mark.
Gold Becomes 37 Percent More Expensive This Year So Far
Gold remains a top choice for investors. Its prices have seen a 37 percent increase year-to-date. In 2024 alone, gold had already rallied by 27 percent.
Several factors are behind this gold rally. A weaker dollar, continuous gold purchases by central banks, and geopolitical tensions have played a significant role in pushing its prices higher. Additionally, uncertainty in the global economy and signs of a recession have also boosted demand for gold.
China's Bank Trusts Gold
In August, China's central bank increased its gold reserves for the tenth consecutive month, further strengthening gold prices in the international market. Experts suggest that when central banks of major economies purchase gold, it sends a positive signal to the market, and investors also consider gold an attractive investment.
The Relationship Between the US Economy and Gold
Weak US economic data often strengthens gold prices. A slowdown in job growth and rising unemployment increase the likelihood of the Federal Reserve cutting interest rates. A reduction in interest rates directly impacts the dollar, causing it to weaken. When the dollar weakens, investors tend to move towards safe-haven assets like gold. This is why gold has been consistently hitting new highs recently.
Silver and Other Metals' Performance
Silver's performance lagged behind gold. Spot silver fell by 0.5 percent to $40.75 per ounce. Platinum saw a slight increase, rising by 0.1 percent to $1,374.35 per ounce. Palladium prices remained stable at $1,109.71 per ounce.
