Gold Prices Hit Record High Amid Rate Cut Speculation

Gold prices reached a record high during Asian trading on Friday, driven by speculation regarding potential interest rate cuts by the Federal Reserve next week. Additionally, increased demand for safe-haven assets due to a tight U.S. presidential election contributed to the rise.

The price of gold surged on Thursday and Friday in response to declines in the U.S. dollar and Treasury yields, as the market continued to bet on an interest rate reduction despite stronger-than-expected inflation data. Weakness in the labor market further reinforced this speculation.

Spot gold increased by 0.3% to $2,566.59 per ounce, while December futures rose by 0.6% to $2,594.70 per ounce by 23:47 ET (03:47 GMT). Spot gold previously peaked at $2,570.06, while gold futures approached $2,600.

Gold Buoyed by Rate Cut Speculation

The rise in gold prices coincided with investor confidence that the Federal Reserve will implement rate cuts during its upcoming meeting. However, uncertainty lingered regarding the extent of the cut. Following strong inflation data, expectations shifted towards a smaller 25 basis points (bps) cut. Yet, weaker labor market data, specifically jobless claims released on Thursday, reignited expectations for a 50 bps reduction. Currently, traders anticipate a 58% chance of a 25 bps cut and a 42% chance of a 50 bps cut, according to CME Fedwatch.

Analysts generally expect next week's meeting to signal the start of a Fed easing cycle, predicting a total cut of at least 100 bps by year-end. With two more Fed meetings scheduled post-September, lower interest rates will likely favor gold and other non-yielding precious metals, as they reduce opportunity costs for investors.

Other precious metals also saw gains but lagged behind gold. Platinum futures rose by 0.6% to $989.80 per ounce, and silver futures increased by 0.6% to $30.280 per ounce.

Copper Rises on China Stimulus Hopes

Industrial metals rallied due to lower interest rate expectations, which typically lead to increased economic activity. Copper prices also found support from anticipation of more stimulus measures in China, the world's top copper importer.

Benchmark copper futures on the London Metal Exchange rose by 0.7% to $9,280.0 per ton, while one-month copper futures increased by 0.4% to $4.2260 per pound. Recent weak economic readings from China have strengthened predictions for additional stimulus to support economic growth. Citi analysts expect to see "incremental" stimulus measures from China throughout the rest of the year.