Gold prices continue to rise to new record high on optimism over Fed rate cut

On Monday, Powell said the Fed would not wait for inflation to reach the central bank’s 2% target before starting to cut rates, because of the lag in the impact of monetary policy. He said the Fed was looking for “greater confidence” that inflation will return to the 2% level. The monthly inflation rate fell in June for the first time in more than four years.

And that has given market watchers confidence. According to the CME’s FedWatch tool, traders are confident the Fed will cut rates by September. When interest rates fall, gold tends to become more attractive relative to fixed-income assets such as bonds.

“The move was triggered by signs of slowing inflation. This was followed by weak economic data,” Daniel Hynes, senior commodities strategist at ANZ, wrote in a note.

Gold prices have hit new highs in recent months due to its appeal as a safe-haven asset amid escalating tensions in the Middle East, as well as bullion purchases by central banks.

“Gold’s ability to find support in any condition this year is noteworthy,” said Vivek Dhar, head of mining and energy commodities research at the Commonwealth Bank of Australia.

“These factors challenged a stronger U.S. dollar, which was largely driven by the market delaying expectations for a federal funds rate cut,” the research analyst said, adding that gold prices could surpass the bank’s forecast of $2,500 an ounce by year-end.