Gold headed for a fourth weekly gain on expectations the Federal Reserve is poised to lower US interest rates, with prices aided by inflows into bullion-backed exchange traded funds.
Bullion rose toward US$3,650 ($4681.26) an ounce, up almost 2% this week, after setting a record in Tuesday’s session. Silver, which can move in tandem, topped US$42 an ounce to hit the highest since 2011. On Thursday, data showed US consumer prices rose as expected in August, handing Fed policymakers the leeway to reduce borrowing costs after a string of weak labour-market prints.
Traders have priced in at least one quarter-point cut at the Fed’s meeting next week, and possibly two more by the end of the year. The US dollar and 10-year Treasury yields have lost ground this week. Lower borrowing costs, falling yields, and a weaker greenback typically benefit the precious metal.
Gold has rallied by 39% this year, making it one of the best performing commodities, and outpacing other market gauges including the S&P 500 Index. The surge has been supported by central-bank buying, geopolitical uncertainties, and inflows into ETFs. In addition to setting a nominal record this week, gold has also surpassed its inflation-adjusted peak set more than 45 years ago.
While rising geopolitical tensions could boost prices, “we believe the September rate cut will produce limited gains for gold, with most of the upside already priced in,” BMI, a Fitch Solutions company, said in a note.
See also: State Street’s gold ETF rakes in billions as metal hits record
Bullion-backed ETFs have expanded by almost 25 tons so far this week, according to data compiled by Bloomberg.
Gold has also been aided by President Donald Trump’s attempt to extend his influence over the US central bank. On Thursday, he asked an appeals court to pause a lower-court decision that blocked his bid to oust Fed Governor Lisa Cook for alleged mortgage fraud. The administration asked for a ruling by Monday, one day before Fed policymakers start their September meeting.
Prices traded 0.4% higher at US$3,649.33 an ounce at 10.33am in Singapore. The Bloomberg Dollar Spot Index was steady, on track for a weekly loss of 0.3%. Palladium headed for a weekly gain of almost 8%, while platinum edged higher.
In Asia, Thai households are poised to buy more gold for a fifth year, as a rally in the local currency makes bullion more affordable. That’s complicating efforts by the central bank to curb the metal’s influence on the baht.
