Gold Price Climbs To New Record High As Fed Cut Hopes Grow

(July 16, 2024 - Oliver Haill)

The gold price hit a record high on Tuesday, topping $2,460 per ounce, with bitcoin also on the rise.

Gold has risen around 4% over the week to $2400 per ounce at the start of Tuesday, while bitcoin has also climbed back 2% higher to almost $64,000.

Both assets are close to their all-time highs, with gold only a few dollars shy of breaking its May high of $2,450, while bitcoin's peak above $73,00 was in March.

Analysts pointed to possible drivers of demand being the assassination attempt on Donald Trump and comments from the Federal Reserve chief Jerome Powell about interest rates that increased demand for government bonds, putting pressure on yields.

"Thanks largely to weakness in economic data, and falling inflationary pressures, bond yields are continuing to remain under pressure. This is helping to boost the appeal of low- and zero-yielding assets, and thereby keeping the gold outlook positive," said market analyst Fawad Razaqzada at City Index.

Most banks now expect two Fed rate cuts in 2024, totalling half a percentage point, with the majority expecting this to start in September, SP Angel analyst John Meyer pointed out, with markets now pricing in a 60% chance of a third 25bp cut in 2024.

"We would expect these to be on the conservative side if labour market weakness accelerates and unemployment rises over the 5% mark," Meyer added.

"The underlying trend is clearly bullish with the metal already achieving three consecutive weeks of positive closes," said Razaqzada.

"This persistent performance positions gold to potentially conclude its sixth straight month of gains and achieve a new record while at it."

Over the past ten months, gold has experienced only one monthly decline, he noted, the 1.1% drop in January, which he says has made the 'buying the dip strategy' more effective than shorting gold.