Gold jumps to record as traders ramp up bets on Fed rate pivot

Gold hit a record high as hopes for Federal Reserve rate cuts grow and some traders ramped up bets on a second Donald Trump presidency.

Spot bullion rose as high as $US2469.66 an ounce, moving past the previous all-time peak set in May. The rally comes as signs of slowing inflation in the US fuel speculation the central bank will soon start lowering interest rates. High rates tend to be negative for gold, which bears no interest.

Even so, the metal has still soared nearly 20 per cent this year, supported by large purchases from central banks, strong consumer appetite in China and demand for haven assets amid geopolitical tensions. A recent uptick in holdings by exchange-traded funds is also aiding upward momentum.

“Optimism about US interest rate cuts as more economic data supports the case for a Fed pivot is supporting gold,” Ewa Manthey, a commodities strategist at ING Bank, said earlier on Tuesday.

“Gold is poised to keep its positive momentum going amid the current global geopolitical and macroeconomic landscape, while central bank demand is expected to grow.”

On Monday, Fed chair Jerome Powell said recent data had given policymakers greater confidence that inflation is heading down to the central bank’s 2 per cent goal, and traders now see two quarter-point rate reductions this year.

Traders have been adding bets there will be three cuts this year after Goldman Sachs said conditions were ripe for easing, with “a solid rationale” for officials to lower rates as soon as July.

Gold’s latest rally isn’t necessarily unexpected. In June, consultancy Metals Focus predicted a fresh record this year, while earlier this month Citigroup said its base case for gold in 2025 was $US2700-$US3000 an ounce.

Trump momentum

Investors across markets are also weighing the likelihood that Trump will return to the White House, as his candidacy gains momentum following a failed assassination attempt over the weekend and the dismissal of a criminal case against him.

Gold could draw some support from a Trump presidency, said David Higgins, head of trading at Merrion Gold.

“He’ll cause lots of people to buy when he’s elected”, because retail customers — mainly smaller buyers — associate him with instability, Higgins said.

Spot gold was up 1.9 per cent at $US2467.58 an ounce in late trade in New York. The Bloomberg Dollar Spot Index was little changed, while US 10-year Treasury yields fell. Silver, palladium and platinum rose.

Bloomberg