Gold Prices Reach Record High

Gold prices hit a record high in Asian trade on Friday, driven by speculation that the Federal Reserve will cut interest rates next week and increased safe haven demand amid a tight U.S. presidential election.

The yellow metal surged on Thursday and Friday, following declines in the dollar and Treasury yields, as market participants maintained bets on an interest rate cut despite stronger inflation data. Signs of labor market weakness further supported this expectation.

Current Prices
Spot gold rose 0.3% to $2,566.59 an ounce, while December futures climbed 0.6% to $2,594.70 an ounce by 23:47 ET (03:47 GMT). Spot gold previously surged to a record high of $2,570.06, with futures nearing $2,600.

Gold Buoyed by Rate Cut Speculation

Investors are convinced the Fed will cut rates in its upcoming meeting, although uncertainty remains over the extent of the cut. Strong inflation readings earlier in the week shifted expectations towards a smaller, 25 basis points reduction. Conversely, softer labor market data, particularly jobless claims released Thursday, renewed speculation for a 50 basis points cut.
CME Fedwatch indicates a 58% probability for a 25 basis points cut and a 42% chance for a 50 basis points cut.

Analysts anticipate the Fed’s meeting next week will signal the beginning of an easing cycle, projecting at least a 100 basis points cut by the end of the year. With two more Fed meetings left in 2023, this brings favorable conditions for gold and other precious metals, as lower rates reduce the opportunity cost of investing in non-yielding assets.

Other precious metals showed gains, although still lagging behind gold. Platinum futures rose 0.6% to $989.80 an ounce, while silver futures climbed 0.6% to $30.280 an ounce.

Copper Rises on China Stimulus Hopes

Industrial metals benefited from anticipation of lower rates, which often signal higher economic activity. Copper prices received additional support from expectations of more stimulus measures in China, the largest importer.
Benchmark copper futures on the London Metal Exchange rose 0.7% to $9,280.0 a ton, with one-month futures increasing 0.4% to $4.2260 a pound.

Weak economic readings from China have prompted speculation that the government will implement more stimulus measures to enhance growth. Citi analysts predict “incremental” stimulus efforts from China for the remainder of the year.