Gold prices have surged to a new record high as investors anticipate a potential interest rate cut by the US Federal Reserve this week. The rising price also reflects broader expectations of further monetary easing in the coming months. Bullion exceeded $US3700 an ounce for the first time, buoyed by the decline of the US dollar, which has fallen to its lowest level in over 10 weeks. Near 3.45pm in New York (5.45am AEST), the spot price of gold was trading 0.3 per cent higher at $US3689.88.
Markets have already factored in a rate cut for this week. The Fed is scheduled to release its quarterly update of economic and rate forecasts, known as the dot plot. Following the release, chairman Jerome Powell will hold a news conference to discuss the decision and outlook.
Recent weak labour data coupled with stable inflation figures have increased the likelihood of additional rate cuts later in the year. Lower interest rates typically benefit gold, as the precious metal does not offer a yield, making it more attractive compared to interest-bearing assets in a low-rate environment. Investors are closely watching the Fed’s announcements for further cues on monetary policy.
