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Gold about to trade above $2500 for first time in history
Gold prices rose in European trade on Wednesday on track for the third profit in a row, hitting a fresh record high and about to trade above $2500 for the first time in history as US 10-year treasury yields swooned.
The odds of US interest rate cuts in September and November surged to 100% this week after less aggressive remarks by Fed Chair Jerome Powell.
Prices
Gold prices rose 0.55% today to $2482 an ounce, a record high, with a session-low at $2461.
On Tuesday, prices rose 1.9%, the second profit in a row, and the largest such profit in 2024.
US Yields
US 10-year treasury yields fell 0.2% on Wednesday on track for a second decline in a row, plumbing four-month lows at 4.156% and buoying non-yielding assets.
Powell
Fed Chair Jerome Powell said in an earlier speech in Washington that latest consumer prices data bolsters confidence that inflation is returning to the 2% target sustainably, with three consecutive readings presenting better than expected results.
Following the remarks, the odds of a 0.25% September rate cut by the Federal Reserve rose to a full 100% according to the Fedwatch tool, with a similar 100% likelihood of a rate cut in November.
Now investors await a host of speeches and remarks by several Fed officials later today to get more clues about the future of monetary policy.
The SPDR
Gold holdings at the SPDR Gold Trust rose 5.49 tonnes yesterday, the second increase in a row, and the largest since July 2, to a total of 842.02 tonnes, a February 8 high.
Sterling approaches $1.3 after inflation data
Sterling rose in European trade on Wednesday against a basket of major rivals, extending gains for the second day against the dollar and scaling a year high, and about to trade above $1.3 for the first time in 2024 following inflation data.
The data showcased the inflationary pressures on Bank of England policymakers, in turn hurting the odds of a UK interest rate cut in August.
The Price
The GBP/USD rose 0.2% today to $1.2997, the highest since July 2023, with a session-low at $1.2966.
The pound rose 0.1% on Tuesday, resuming gains and stemming losses.
Inflation
Government data showed UK consumer prices rose 2% y/y in June, above estimates of 1.9%.
Core prices rose 3.5% in June, above estimates of 3.4%.
Services prices surged 5.7% in June, matching expectations.
The data shows the risks of inflation remain persistent in the UK, in turn necessitating more aggressive measures.
UK Rates
Following the data, the odds of a 0.25% BOE interest rate cut in August fell from 47% to just 25%.
US Rates
On the other hand, the odds of Federal Reserve 0.25% interest rate cuts in September and November rose to 100% following less aggressive remarks by Fed Chair Jerome Powell.
Interest Rate Gap
The current UK-US interest rate gap stands at 25 basis points in favor of the US, the lowest such pace since March 2022.
It’s likely such a gap will completely disappear in September if the Fed indeed went ahead with a 0.25% rate cut.
Gold surges to fresh record highs on US rate outlook
Gold prices rose on Tuesday to fresh record highs as the dollar traded mostly flat against most major rivals amid increasing expectations of multiple Fed interest rate cuts this year.
Earlier government data showed US retail sales stabilized in June, while separate data showed import prices also steadied.
According to the Fedwatch tool, there’s a 91.4% chance of a Federal Reserve 0.25% interest rate cut at the September meeting, and an 8.4% chance of a 0.5% rate cut.
As for the July meeting, the overwhelming likelihood (93.3%) is on maintaining interest rates unchanged.
Otherwise, the dollar index rose 0.1% as of 18:44 GMT to 104.3, with a session-high at 104.5, and a low at 104.2.
On trading, gold spot prices rose 1.65% as of 18:45 GMT, or $40 to $2468 an ounce.
Dow Jones expands gains towards fresh record highs
Most US stock indices rose on Tuesday with Dow Jones marking successive record highs amid expectations the Fed will cut interest rates soon.
Earlier government data showed US retail sales stabilized in June, while separate data showed import prices also steadied.
According to the Fedwatch tool, there’s a 91.4% chance of a Federal Reserve 0.25% interest rate cut at the September meeting, and an 8.4% chance of a 0.5% rate cut.
As for the July meeting, the overwhelming likelihood (93.3%) is on maintaining interest rates unchanged.
On trading, Dow Jones rose 1.5%, or 583 points as of 17:22 GMT to 40,799, while S&P 500 rose 0.2%, or 14 points to 5645, as NASDAQ shed 0.3%, or 62 points to 18,410.