Gold futures hit all-time high on rate cut momentum

[Ben Graham]

Gold advanced near a record high on Monday as momentum continues to build for a Federal Reserve rate cut this month amid concerns of US economic risks.

Spot gold traded as high as $3,489.69 per ounce during the morning trading, just $11 shy of the all-time high of $3,500.05 set in late April. By 11 a.m. ET, it had pulled back slightly to $3,475.60 for a 0.8% gain.

US gold futures also rose 0.8% to $3,545.60 per ounce, having set a new high of $3,557.10 earlier.

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The move builds on a 2.5% gain last week as new US economic data, which showed stubborn inflation and healthy consumer demand, further solidified chances of a September rate cut, making gold more appealing to investors.

Also buoyed by the rate cut expectation is silver, which touched $40 per ounce for the first time since 2011 on Monday.

Meanwhile, the US dollar was trading near its lowest since July 28 against a basket of currencies, making precious metals cheaper for overseas buyers.

“Gold, and especially silver, extended Friday’s strong gains, supported by sticky US inflation, weakening consumer sentiment, (expected) rate cuts … and concerns over Fed independence,” Saxo Bank’s head of commodity strategy, Ole Hansen, told Reuters.

In a social media post last week, San Francisco Federal Reserve Bank President Mary Daly reiterated her support for a rate cut, citing labour market risks.

“The market is watching for Friday’s US job market report, anticipating that this would allow the Fed to resume rate cuts from September onwards (given) this supports investment demand,” said UBS analyst Giovanni Staunovo.

The August non-farm payrolls, due Friday, are expected to have grown by 78,000 jobs versus 73,000 in July, a Reuters poll showed.

(With files from Reuters)