Gold futures surge past $2,700: A historic milestone in precious metals

In a historic milestone for the precious metals market, gold futures have surged to record-breaking levels, surpassing the psychologically important mark of $2,700 per ounce. This significant achievement not only establishes a new high for gold but also represents the highest monetary value ever attained by any precious metal—be it gold, silver, platinum, or palladium—in history.

On a crucial trading day, the most actively traded December contract for gold futures opened at $2,681.20. After some fluctuations, it closed at $2,695.10, reflecting a notable increase of $13.80, or 0.51%. The intraday peak of $2,708.70 per troy ounce showcases gold's enduring status as a safe-haven asset. This unprecedented price level emphasizes gold's inherent value while simultaneously revealing a growing lack of confidence in global fiat currencies.

Further rate cuts are expected

The steady rise in gold prices can be attributed to a variety of factors, with recent interest rate decisions by central banks playing a pivotal role. The Federal Reserve's recent 50 basis point reduction in its benchmark Fed funds rate, which now stands between 4.75% and 5%, has been a major catalyst for this surge. This decision, mirrored by central banks globally, has propelled the rally in precious metals.

Market sentiment indicates that further rate cuts may be forthcoming. According to the CME FedWatch Tool, there is a 51.1% likelihood of an additional 50-basis point cut at the Federal Reserve's upcoming FOMC meeting on November 7, while 48.9% anticipate a 25-basis point reduction. This expectation of ongoing monetary easing has enhanced gold's attractiveness as a hedge against potential currency devaluation.

Gold price pulls back from record high ahead of US PCE

Investors are eagerly anticipating the release of the Personal Consumption Expenditures (PCE) report, a crucial inflation indicator closely watched by the Federal Reserve. Economists surveyed by Dow Jones and the Wall Street Journal predict a continued decline in annual core inflation, forecasting a drop to 2.2% in August from 2.5% in July. This trend would signify a notable deceleration from the 40-year high recorded in June 2022 and could bolster the argument for further rate cuts.

The Core PCE Price Index for August is projected to reflect a modest month-over-month increase of 0.2% and a year-over-year rise of 2.7%. These core figures, which exclude the more volatile food and energy prices, are especially important as they represent the Federal Reserve's preferred measure of inflation.

Outlook for Gold Prices

A stronger US dollar and risk-on sentiment weigh on gold prices, but expectations of a Fed rate cut offer underlying support. Geopolitical tensions in the Middle East keep demand for safe-haven assets like gold steady, but risk appetite limits major price movements.

Gold (XAU/USD) is trading at $2,669.85, down 0.09% in the latest session, holding near a key pivot point at $2,666.36. The precious metal is experiencing a cautious range, with immediate resistance at $2,674.04 and additional levels at $2,678.91 and $2,685.48.

Support on the downside is holding steady at $2,660.70, with deeper levels coming in at $2,654.91 and $2,649.86.

Despite the pressure from a stronger USD, the outlook for gold remains somewhat optimistic due to rising expectations of dovish Federal Reserve actions.

A 50 basis point rate cut could provide a substantial boost to the non-yielding asset. However, any uptick in risk sentiment or stronger-than-expected US inflation data could keep gold prices in check, preventing a significant rally.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.