Investing.com: Gold Prices Surge on Rate Cut Expectations - Weekly Gains Expected
In a strong move on Friday, gold prices soared to new highs as investors anticipate interest rate cuts by the Federal Reserve. At 09:55 ET (13:55 GMT), gold rose by 1.5% to $2,493.86 an ounce, while silver gained 1.6% to $2,533.10 an ounce. Both precious metals are on track for weekly gains of over 2%.
The rise in gold prices is fueled by expectations of a rate cut by the Federal Reserve in September, following soft inflation data released earlier in the week. Although stronger economic data has tempered expectations for a larger rate cut, the overall sentiment remains positive for gold as lower rates reduce the opportunity cost of investing in non-yielding assets. Additionally, ongoing geopolitical tensions in the Middle East are also supporting the safe-haven appeal of gold.
According to Alpine Macro, investors should consider buying gold as a hedge against escalating tensions in the Middle East. The research firm warns of potential limited attacks by Iran on Israel, which could lead to a larger conflict in the region. The note emphasizes the volatile nature of the situation and the risks involved, suggesting that the conflict could escalate in the next 6-9 months.
On the industrial metals front, copper prices edged lower on Friday but are set for their first weekly gain in six weeks. A strike in Chile’s Escondida mine, the world’s largest copper mine, has tightened supply outlooks, supporting prices. Any prolonged disruption in production at Escondida could further support copper prices, although concerns over sluggish demand persist.
Overall, the current market conditions favor investments in gold as a safe-haven asset amidst geopolitical tensions and expectations of a rate cut. Copper prices, on the other hand, are supported by supply concerns but face challenges from weak demand. Investors should closely monitor these factors to make informed decisions about their portfolios.