XAU/USD: Gold Blasts Off to New Record Above $2,570 as Fed’s Rate Cut Draws Near

Prospects of lower interest rates boosted demand for the precious metal, which becomes more attractive as a non-yielding asset.

• Gold XAUUSD hit a new record high shooting past $2,570 per ounce as traders ramped up their bets after the latest batch of data all but pointed to an interest rate cut by the Federal Reserve next week. On the one hand, weekly jobless claims rose 2,000 to 230,000, suggesting a slight contraction in the US economy. And on the other hand, producer prices ticked up more than expected for August amid higher expenses on the wholesale level.
• All that bolstered hopes ofl an interest rate cut by at least 25 basis points by the Federal Reserve next week. Some market participants expect the trim to reach 50 basis points. Because of this, the precious metal is in attack mode — lower interest rates make it more appealing as a non-yielding asset while at the same time the US dollar loses some of its allure as it starts yielding less on deposits.
• Bullion has been having a strong year so far. More than that, it’s been a year of all-time highs against the backdrop of geopolitical tensions and monetary policy pivots. Central banks are looking to start unwinding their relatively high interest rates. To this end, what the Fed will do with interest rates on September 18 will be key to setting the tone for gold’s next moves. While the market still has doubts about the magnitude — 25 or 50 basis points — gold has been outperforming most other big players with a 25% year-to-date gain, versus an 18% increase in the S&P 500.