Gold Surges to Fresh Record High As Fed Rate Cut Hopes Grow

Gold extended its record-breaking rally on September 9, amid renewed demand for the safe haven as investors bet on hopes of a rate cut from the Federal Reserve in an environment of global trade uncertainties.

Spot prices touched $3,647 an ounce in intraday trade, marking the third straight session of gains and adding to a near-40% surge this year. The upswing has been supported by sustained central-bank buying, softer Treasury yields and investor bets ahead of the key US inflation data, due later this week.

The yellow metal has consistently drawn inflows from funds and official institutions, with China’s central bank continuing its buying spree for a tenth consecutive month in August. Exchange-traded funds have also reported fresh demand, although total holdings remain below levels reached during the pandemic and the Russia-Ukraine conflict.

Analysts note that while weaker US labour market figures have accelerated bets on Federal Reserve rate cuts, the broader momentum in gold reflects concerns over policy uncertainty and the resilience of the dollar.

Benchmark 10-year US Treasury yields have fallen to their lowest in five months, narrowing the opportunity cost of holding gold. At the same time, traders have raised bets that the Federal Reserve will begin cutting rates as early as its meeting next week. According to the CME FedWatch tool, markets are pricing in an 88% chance of a 25 basis-point reduction, with some probability of a larger 50 basis point cut.

Beyond the Fed, investors are looking ahead to a series of US data releases including producer and consumer price reports later this week that could shape expectations for the pace of easing. Market participants are also monitoring upcoming Treasury auctions for insight into investor demand for government debt, another key variable influencing flows into gold.

While the short-term path for bullion will hinge on these indicators, analysts argue the structural case remains intact. Concerns about political pressure on the Fed, persistent trade frictions and steady official-sector demand have reinforced the perception of gold as a hedge. Some banks, including Goldman Sachs, see scope for the metal to rally further, with forecasts pointing towards levels approaching $5,000 an ounce if flows out of Treasuries accelerate.