Gold hits 14-month high on US Fed rate cut bets

Gold prices on the European market rose on Friday to extend gains for a third consecutive day, setting a new record high in 14 months, based on strong prospects for the US Federal Reserve to cut interest rates in the next few months, as well as safe-haven demand increase amid investors' risk-aversion.

As of 08:45 GMT, gold prices rose by more than 1.0% to trade at $1,355.55 per ounce from the opening of $1,341.86 and recorded the highest level (since April 11, 2018) at $1,358.14 with a low of $1,341.80.

Yesterday, gold prices rose 0.7%, the second daily gain in a row, on the  US-China trade war concerns and the rising geopolitical tensions in the Gulf region.

This week, gold prices notched 1.2%, making their fourth consecutive weekly gain, among the longest weekly gains streak this year, based on US interest rate cuts prospects.

According to the FedWatch tool of the CME, the market is pricing the possibility of a US interest rate cut of around 78% in July and about 97.1% for cuts by December.

The prospects have recently increased widely as the weak economic data from the United States, which indicates that the country's economic growth has slowed in the second quarter of this year, as well as the administration of US President Donald Trump requesting lower interest rates.

In addition to the continued pressure from US President Donald Trump on the monetary policymakers to reduce interest rates, to support the US government in its trade wars against several countries.

Donald Trump on Tuesday criticized the rise in US interest rates and the policy of the Federal Reserve, saying “The Fed Interest rate way too high, added to ridiculous quantitative tightening! They don’t have a clue!”

Also the strong gains for gold and other precious metals drew support from the acceleration of investment demand for safe assets, as fears of a worsening US-China trade war continue, as well as the rising geopolitical tensions in the Gulf region.

Gold holdings with the SPDR Gold Trust Fund (The largest gold-backed global index funds) remained unchanged yesterday, with the total at 759.7 metric tons, the highest since April 8.