Gold prices reached a record high in Asian trade on Monday as investors anticipate a larger interest rate cut by the Federal Reserve later this week. This surge in prices was also fueled by reports of a second assassination attempt on Republican presidential nominee Donald Trump, which led to increased demand for safe-haven assets.
Asian trading volumes were somewhat limited due to market holidays in Japan, China, and South Korea. Gold rose 0.4% to a record high of $2,589.02 an ounce, while futures expiring in December rose 0.1% to $2,613.70 an ounce.
Gold benefits from rate cut bets as Fed looms
The softer dollar allowed for more strength in gold prices, as markets awaited the upcoming Fed meeting. The central bank is expected to announce a rate cut on Wednesday, with markets divided between a 25 or 50 basis point cut. The latest data shows that markets are split exactly 50% over the two options, with bets on a larger cut gaining traction due to concerns over weakness in the labor market.
Analysts anticipate that the Fed will kick off an easing cycle this week, with expectations of at least 100 basis points of rate cuts by the end of the year. Lower interest rates are favorable for precious metals as they reduce the opportunity cost of investing in non-yielding assets. Silver also rose 0.4% to $1,004.80 an ounce, while platinum rose 0.8% to $31.332 an ounce.
Trump assassination attempt spurs some safe haven demand
Gold experienced safe-haven demand following reports of a second assassination attempt on Trump at his golf course in Florida. Despite the incident, Trump remained unharmed as secret service agents foiled the attempt and apprehended the assailant. This event contributed to the increase in demand for safe-haven assets.
Copper prices steady after weak Chinese data
Copper prices remained steady after weak economic data from China, the world's largest copper importer. While the softer dollar supported gains in copper prices, concerns over an economic slowdown in China arose due to lower-than-expected growth in industrial production and retail sales for August.
Benchmark copper on the London Metal Exchange rose 0.1% to $9,276.0 a ton, while one-month futures rose 0.1% to $4.2225 a pound. ANZ analysts noted that the Chinese government may consider implementing stimulus measures to counteract the economic slowdown.
Analysis and Implications:
The record high in gold prices and the anticipation of a Federal Reserve rate cut indicate a shift in the global economic landscape. Investors are turning to safe-haven assets like gold and silver amidst economic uncertainties and geopolitical tensions. The potential easing cycle by the Fed could support precious metal prices in the coming months, making them attractive investment options.
Additionally, the stability in copper prices following weak Chinese data highlights the interconnectedness of global markets. The Chinese government's response to the economic slowdown could have ripple effects on commodity prices and global trade. Investors should closely monitor these developments to make informed decisions about their portfolios and financial strategies.