Spot Gold hits record high, surpasses $2,500

Spot gold topped $2,500 an ounce for the first time, bolstered by hopes that the US Federal Reserve is edging closer to cutting interest rates.

Key points:

• The price of spot gold topped $2,500 an ounce on Friday, a new high.
• The metal is rising on confidence that interest-rate cuts are imminent.
• The precious metal could eventually reach $2,900, one analyst projected.

On Wednesday, spot gold surged to a record high, surpassing $2,500 per ounce. The metal has risen over 20% this year, driven by expectations that interest rates may eventually decrease. Since gold yields no interest, it becomes a more attractive investment when central banks cut rates. On Friday, spot gold rose up to 1.8% following new housing data that fueled bets on lower interest rates. July's new-home starts hit their lowest point since 2020, amplifying concerns about economic strength amid recent inflation and labor market weakness.

Last month, JPMorgan forecast that Fed cuts would extend the gold rally but predicted that gold would hit the $2,500 mark in the fourth quarter.

Some analysts have raised their outlooks for where the bullion could be headed in the long term.
According to Alex Kuptsikevich, a senior market analyst at FxPro, gold could eventually trade between $2,800 and $2,900. That's based on how the metal moved from a bottom in October 2022 through September 2023, he wrote Friday.

Reasons behind the rising of gold price

Fed interest-rate cuts

Gold prices soared above $2,500 per ounce for the first time, driven by optimism that the US Federal Reserve may soon lower interest rates. On Friday, spot gold surged by up to 2.2%, surpassing the previous record set last month. This increase was fueled by weaker-than-expected data from the US housing market, which strengthened expectations for more substantial and immediate rate cuts by the Fed. Lower interest rates typically benefit gold, as the metal does not yield any interest income.

Persistent geopolitical risks

The persistent geopolitical tensions in the Middle East and the ongoing war in Ukraine are driving increased safe-haven demand for gold. Over the weekend, conflict between Hezbollah and Israel intensified, despite efforts to reduce tensions and avert a potential Hezbollah-Iran strike on Israel, according to the Guardian. The news outlet reported that an Israeli attack on Saturday resulted in one of the deadliest incidents for civilians since the conflict erupted in October.

Value of the U.S. dollar

As gold becomes more attractive during times of economic uncertainty or when interest rates are expected to fall, the demand for gold rises, often leading to a decline in the dollar’s value. Lower interest rates reduce the dollar's appeal, making non-yielding assets like gold more attractive to investors. This dynamic highlights how shifts in monetary policy and economic conditions can influence the relationship between gold prices and the US dollar.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

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.