Gold Hits Record Highs as Fed Rate-Cut Bets Boost Safe-Haven Demand
Gold has reached unprecedented heights, climbing to record highs for four consecutive sessions. As of October 16, the price of spot gold surged to $4,316.99 per ounce, driven by mounting tensions between the U.S. and China, along with expectations of interest rate cuts by the Federal Reserve.
Unprecedented Gold Price Levels
On this day, gold touched an all-time peak of $4,318.75. U.S. gold futures for December delivery also saw significant gains, settling at $4,304.60 per ounce, after reaching $4,335 earlier in the session. Year-to-date, gold has risen over 60% due to various factors.
Factors Influencing Gold Prices
- Geopolitical tensions
- Speculation about Federal Reserve rate cuts
- Increased central bank buying
- De-dollarisation efforts
- Strong inflows into gold exchange-traded funds (ETFs)
Market analysts, including Zain Vawda from MarketPulse, suggest that the future trajectory of gold prices will depend on the rate-cut outlook and developments surrounding U.S.-China relations. A continued deterioration in these relations could propel gold past the $5,000 per ounce mark.
U.S.-China Trade Concerns
Recent trade tensions have kept investors on edge. The U.S. criticized China’s expanded export controls on rare earth metals, labeling them as threats to global supply chains. This ongoing spat emphasizes the market’s focus on geopolitical risks.
Federal Reserve Rate Cut Expectations
Traders are currently anticipating a 25 basis-point rate cut from the Federal Reserve in both October and December, with probabilities near 98% and 95%, respectively. Lower interest rates generally boost interest in non-yielding assets like gold.
Future Price Projections
HSBC has updated its forecast for average gold prices in 2025, raising it to $3,355 per ounce. This revision reflects ongoing safe-haven demand amid economic uncertainty and a weaker U.S. dollar.
Impact of U.S. Government Shutdown
The ongoing U.S. government shutdown has interrupted key economic data releases, with Treasury officials warning that the shutdown could lead to an economic loss of up to $15 billion per week.
Performance of Other Precious Metals
In addition to gold, other precious metals have also witnessed gains. Silver rose by 1.8% to reach $54.04 per ounce, having peaked at $54.15 earlier. Platinum increased by 3.2% to $1,706.65, while palladium climbed 4.6% to $1,606.00.
As the market continues to evolve, the demand for gold as a safe haven remains strong, driven by geopolitical and economic uncertainties.
