Gold hits record high as traders bet on US cuts to interest rates

The price of gold hit a fresh record high as traders stepped up their bets that the American central bank will start cutting interest rates next week.
The price has risen by more than 20 per cent this year, peaking at $2,572.98 per troy ounce.
Higher interest rates make gold, which does not offer any yield, less attractive to investors. Thus when influential central banks, such as the US Federal Reserve, begin cutting rates, the appetite for gold grows.
The Fed is widely expected to cut interest rates next week, as data suggests that the American economy could be slowing down. The US Labor Department said this week that initial claims for state unemployment benefits had risen by 2,000 to a seasonally adjusted 230,000.
“US interest rate expectations are reaching a crunch point, with over 100 basis points of cuts implied by the end of 2024,” Edward Allen, of Tyndall Investment Management, a wealth manager, said. “In theory at least, this has a positive impact on gold, as the interest differential between positively yielding cash and zero yielding gold decreases.”
George Cheveley, of Ninety One, the asset manager, said that the price of gold was likely to rise. “Once you break out fresh records, you get momentum and move higher,” he said. “The weakening of the US dollar is also positive for the gold price.”
Goldman Sachs has forecast that the gold price could reach as high as $2,700 by early 2025, buoyed by possible interest rate cuts in America and higher gold purchases by emerging markets’ central banks. Gold could be boosted further if America imposes new financial sanctions or if concerns grow about the US debt burden, the investment bank said.
Since Russia’s invasion of Ukraine in 2022, central banks have been buying gold at roughly three times the rate they did previously. The Chinese central bank has been building its physical gold position over the past two years in an attempt to diversify its reserves funds, with net purchases of 7.23 million ounces last year alone, according to the World Gold Council.