Gold price is floating above $2,500 per ounce

Gold prices have surged this year, climbing for seven consecutive months. The precious metal is up 21% year-to-date, hitting a record high of $2,531, and has outperformed global stocks. The US S&P 500 has gained 16% this year, the Nikkei 225 is up 10%, and the EuroStoxx 50 has risen 6%. Gold has also outpaced most major currency pairs. Few markets have seen such rapid growth as gold in 2024.

Gold prices are rising for months

The price of gold was trading at $2,500.38 per ounce as of 9 a.m. Eastern time today. That’s a +0.1% change from yesterday and an over +23.12% from a year ago. Over the last day, the lowest price for an ounce of gold was $2,485.26. The highest price in the previous 24 hours: $2,523.05.

XAU/USD refers to the spot price of gold traded in U.S. dollars. Here, gold (XAU) is priced against the dollar, and the quoted price indicates the cost of one troy ounce of gold in USD. Other currency pairs, such as XAU/EUR and XAU/GBP, represent gold prices traded in euros and British pounds, respectively.

The spot gold price is the rate at which gold can be exchanged and delivered immediately. While it's commonly quoted in U.S. dollars per troy ounce, it can also be expressed per gram or kilogram. Note that a troy ounce is slightly heavier than a standard ounce.

Why have Gold prices risen to record highs?

Gold prices have hit record highs due to economic uncertainty, geopolitical tensions, and lower interest rates, which boost gold's appeal as a safe haven. Central banks' ongoing gold purchases and rising inflation concerns have further increased demand, driving prices up significantly.

1. Federal Reserve rate cut expectations
One of the main reasons that gold prices have risen so sharply this year is the expectation that the Federal Reserve will cut interest rates aggressively as US inflation has cooled towards the central bank’s 2% target, and growth is showing signs of slowing. Lower interest rates boost gold prices for two key reasons. First, gold does not generate income, so as interest rates decrease, the appeal of holding non-yielding gold increases. In other words, when interest rates are cut, the opportunity cost of holding gold—since it doesn't pay interest—diminishes, often leading to a rise in gold prices.

2. Safe haven demand amid geopolitical uncertainty
Gold is regarded as a safe haven during periods of geopolitical and economic uncertainty. Geopolitical tensions have significantly driven up gold demand, pushing its price to all-time highs. As a safe-haven asset, gold's value typically rises in response to increased geopolitical strife and policy uncertainty. Notably, gold purchases surged after the outbreak of the Ukraine war in 2022 and have recently intensified with the onset of the Israel-Gaza conflict.
Should geopolitical risk ease, Gold prices could slip lower amid safe haven outflows.

3. Central bank buying
Central banks continue to demonstrate a strong commitment to purchasing and accumulating gold. Although overall demand from central banks has moderated with gold prices reaching record highs, the World Gold Council reports that demand remains robust. In July, global central banks added 37 tons to their official reserves, marking a 206% increase from the previous month and the highest monthly total since January. Despite the high gold prices, central banks remain eager to build their gold reserves due to its role as a stable store of value and its performance during crises. China, in particular, has been a significant buyer and reportedly holds around 20% of its reserves in gold.

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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.