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Representatives of the London Bullion Market Association earlier predicted at their annual meeting that the price of gold could rise to $2,941 within the next 12 months, approximately 10% higher than current levels.
The European Central Bank (ECB) is set to announce its latest interest rate decision at 20:15 Beijing time on Thursday, and a second consecutive rate cut is expected, with a faster pace of easing. Currently, the market anticipates a 92.1% likelihood that the Federal Reserve will cut rates by 25 basis points at its next meeting. The Bank of Canada’s next rate-setting meeting will be held on October 23, and most major banks, including the National Bank of Canada, expect that policymakers will lower the benchmark overnight rate by 50 basis points.
The rise in gold prices has been fueled by falling U.S. Treasury yields and expectations that major central banks may further lower rates. On Wednesday (local time, October 16), gold prices approached another record high.
As of 12:40 PM Eastern Time, spot gold was up 0.3%, trading at $2,668.82 per ounce, after earlier reaching a high of $2,684.97. New York’s gold futures rose 0.2%, to $2,684.90 per ounce.
As U.S. Treasury yields fell to their lowest level in a week, market expectations that the Federal Reserve will cut rates again have further strengthened gold’s momentum. Traders currently estimate the probability of a 25 basis point cut by the Fed in November at about 96%.
In the past year, despite persistently high interest rates, the price of gold has continually climbed, setting new historical highs. Many investors are now betting on a shift towards accommodative monetary policy, which, combined with a slowdown in U.S. economic growth, is expected to drive gold prices even higher.
In addition to rate cuts, other key factors contributing to the rise in gold prices include risks associated with fiscal instability, the appeal of safe-haven assets, and geopolitical tensions, all of which are enhancing gold’s performance in 2024.
Moreover, as investors reposition their portfolios in response to the uncertainties surrounding the outcome of the U.S. presidential election, gold prices have received additional support.
UBS analyst Mark Haefele stated, “We expect uncertainty and volatility to increase before the next U.S. government is established. In this environment, gold and oil can serve as effective hedging tools in a portfolio.”
