Gold hits record high of $3,500: What's fueling the rally?
What's the story
Gold prices have hit a new record high, breaching the $3,500 mark per ounce. The surge is largely driven by a weaker dollar and rising expectations of a US interest rate cut this month. The precious metal's appeal has been further bolstered by market concerns over President Donald Trump's criticism of the Federal Reserve's independence and upcoming US non-farm payrolls data.
Market response
Spot gold hit a record high of $3,508.5
On Tuesday, spot gold hit a record high of $3,508.5. US gold futures for December delivery also witnessed a spike of 1.4%, reaching $3,563.40 per ounce. Kyle Rodda from Capital.com attributed the rise to "the weaker economic backdrop and expectations of US rate cuts," as well as "the festering confidence crisis in dollar assets because of US President Donald Trump's attack on Fed independence."
Political impact
Trump's Fed criticism raises rate cut expectations
President Trump has been critical of the Federal Reserve and its Chair Jerome Powell for months, blaming them for not cutting rates. He even recently criticized Powell over an expensive renovation project at the central bank's Washington headquarters. These criticisms have influenced market sentiment, with traders now pricing in a 90% chance of a 25-basis-point Fed rate cut on September 17, according to CME FedWatch tool data.
Economic factors
Weaker dollar boosts gold's appeal
Non-yielding gold usually thrives in low-interest-rate settings. Expectations of a rate cut and concerns over the Fed's independence have put pressure on the US dollar, which is trading near a more than one-month low against its rivals. This has made gold cheaper for foreign buyers, further boosting its appeal.