Rua Gold Inc. (TSXV: RUA, OTC: NZAUF, WKN: H8E)
An Emerging Gold Explorer with Two Highly Prospective Land Packages in New Zealand’s historical gold fields.
Due to the anticipation of an earlier and more significant relaxation of monetary policy by the Federal Reserve to boost the economy, fund managers’ bullish bets on gold have surged to their highest level in over four years.
Weekly data released by the US government on Friday, August 23, shows that as of August 20, hedge funds and other large speculators increased their net long positions in gold by 7.8% to 236,749 contracts, the highest level since early 2020.
With growing expectations of an imminent Fed rate cut, gold prices hit a historic high of $2,531.75 per ounce on Tuesday, breaking the $2,500 mark for the first time this month. Lower rates are generally beneficial for non-yielding gold.
On Friday, Federal Reserve Chairman Jerome Powell hinted that the timing for rate cuts to begin in September had arrived, causing gold prices to rebound above $2500/ounce. In his much-anticipated speech, Powell reiterated officials’ expectations to start reducing borrowing costs next month and explicitly stated his intention to prevent the further cooling of the US labor market.
The statement has influenced a decline in the US Treasury yields and the US dollar, propelling gold prices to rise by 1.3% during the day, coming close to the historical high of $2,531.75 set on Tuesday.
Gold’s recent surge is being driven by expectations of rate cuts, signaling a renewed focus on traditional macro drivers such as bond yields. In recent days, derivative traders have been firmly betting that the Fed will cut rates by as much as a full percentage point before the year-end, with rate cuts of 25 or even 50 basis points possible from September.
Following Powell’s speech, traders have maintained their expectations for the total amount of Fed rate cuts by the year-end, with the likelihood of a 25 basis point cut in September remaining stable.
Bart Melek, global head of commodity strategy at TD Securities, stated in a report, “His speech seems to bode well for gold, copper, and risk assets overall. Powell’s comments also confirm the gold trader expectation of lower interest rates.” TD Bank anticipates that gold prices will further rise to above $2,700 over the next few quarters.
