Gold prices hit record US$2,531 amid interest rate cut speculation

Gold prices continue their upward trajectory, reaching a new record high of US$2,531 per ounce yesterday. Investors are closely monitoring signals from the Federal Reserve regarding potential interest rate cuts at its September meeting.

Gold brokers attribute the increase to the asset’s status as a safe haven amid ongoing tensions in the Middle East and the Russia-Ukraine conflict. Tanarat Pasawongse, Hua Seng Heng Group Chief Executive, noted that support factors from last week persist. Federal Reserve Chair Jerome Powell is slated to deliver a speech on the US economic outlook at the central bank’s annual conference in Jackson Hole tomorrow, August 23.

Expectations are high that Powell will outline a plan for reducing interest rates starting in September, Tanarat said.

“If the chairman’s statement indicates the rate cut will be more than the market expects, it will push the gold price up further.”

Yesterday, spot gold increased by 0.15% to US$2,517 per ounce around noon, while US gold futures rose by 0.2% to US$2,555.20. The precious metal has gained approximately US$460 or 22% this year, driven by geopolitical tensions, uncertainty surrounding the upcoming US presidential election, and potential rate cuts.

Tanarat stated that there is a 75% probability that the Fed may reduce interest rates by 25 basis points, and a 25% chance of a 50 basis point cut. The extent of the rate cut could significantly impact gold prices.

Meanwhile, conflicts in the Middle East and Ukraine are intensifying, with Israel continuing its attacks on the Gaza Strip, raising concerns that ceasefire negotiations may fail.

Hua Seng Heng anticipates gold price support levels at US$2,460 and US$2,430, with resistance levels at US$2,520 and US$2,540. For domestic prices, support levels are projected at 40,600 baht and 40,800 baht (US$1,180 and 1,190), with resistance at 41,400 baht and 41,600 baht (US$1,200 and 1,210).

MTS Gold indicated that gold prices could remain above US$2,500 despite some minor profit-taking pressures. The price dipped to US$2,486 before rebounding to US$2,504 on August 19, reported Bangkok Post.

On August 16, spot gold surged past US$2,500 per ounce, buoyed by optimism over US rate cuts, strong central bank buying, and safe-haven demand amid Middle East tensions.

The US dollar’s near seven-month low has further supported dollar-denominated gold. Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reached their highest level in seven months at 859 tonnes on August 19.