Gold prices surge to record high amid US rate-cut expectations
What's the story
Gold prices have hit a new all-time high of $4,383.73 per ounce on Monday. The surge is mainly due to expectations of more US Federal Reserve rate cuts and persistent demand for safe assets. A weaker dollar has also made gold more appealing to international buyers. Investors are currently expecting two rate cuts in 2026, further boosting the appeal of non-yielding gold.
Market dynamics
Gold's performance amid global uncertainties
As a traditional safe-haven asset, gold has witnessed a whopping 67% increase this year. The spike can be attributed to geopolitical and trade tensions, strong central bank buying, and expectations of lower interest rates next year. A lower dollar index has also contributed to the rise by making the precious metal more affordable for overseas buyers. Silver and other metals like platinum have also been rising, reflecting broader investor interest in hard assets amid market volatility.
Impact
Why gold flourishes in a low-rate environment
Gold thrives in low-interest-rate environments primarily due to lower opportunity costs. Unlike bonds or savings accounts, gold does not generate interest. When rates fall, the "cost" of holding gold declines, making it more attractive to investors. Lower rates also tend to weaken the US dollar. Since gold is priced in dollars, a softer greenback makes the metal cheaper for overseas buyers, lifting demand and pushing prices higher.