Gold prices soar to all-time high: Here we decode why
What's the story
Gold prices have hit an all-time high today, surpassing yesterday's record of nearly $3,685 per ounce. The surge comes as investors anticipate a Federal Reserve rate cut this week and consider possible further monetary easing in the coming months. The rise was also aided by a measure of the US dollar falling to its lowest level in over seven weeks.
Market expectations
Federal Reserve's dot plot could influence gold prices
While markets have already priced in a rate cut this week, the Federal Reserve will also release its quarterly update of economic and rate forecasts. This update, known as the dot plot, along with Chair Jerome Powell's post-decision press conference, could further impact gold prices. A series of weak labor data and no major inflation surprises have increased expectations for more rate cuts this year, an outlook that favors non-interest-bearing assets like gold.
Political impact
Political pressure on Fed strengthens dovish outlook
US President Donald Trump's increasing pressure on the Federal Reserve, including his attempt to remove Governor Lisa Cook, has strengthened expectations of a more dovish monetary policy. Further, Stephen Miran, an economic advisor from the Trump administration, is set to join the central bank. These political developments are also contributing to gold's upward trajectory in the market.
Stats
Gold's remarkable year-to-date performance
Gold has gained over 40% this year, outperforming major assets like the S&P 500 index. It has also surpassed its inflation-adjusted peak of 1980. Goldman Sachs Group predicts that if only 1% of privately held Treasuries move to gold, bullion could hit $5,000 an ounce.