Gold prices soared above $2,580 per ounce on Monday, reaching record highs. This surge was fueled by a weakening dollar and falling bond yields as anticipation grows for a significant US interest rate cut later this week.
According to the CME’s FedWatch Tool, market sentiment is shifting towards the expectation of an aggressive 50 basis point cut by the Federal Reserve, with investors placing a 59% probability on this outcome. A smaller 25 basis point reduction is viewed as less likely, with only a 41% chance. This comes on the back of a recent job report highlighting continued softening in the US labor market, as weak August payroll figures suggest slowing employment growth.
Additionally, while US inflation appears to be easing, some underlying pressures remain. Gold has also been buoyed by the European Central Bank’s recent decision to lower its key interest rate, signaling confidence that inflation in the Eurozone is under control.
The combination of these factors has made gold a favored safe-haven asset in uncertain times, offering investors a hedge against potential economic downturns and market volatility. As we await the Fed’s upcoming announcement, all eyes remain on how this could impact the broader financial markets and the future trajectory of gold prices.
