LONDON: Gold prices jumped more than 1 per cent to a record high on Tuesday, as investors flocked to the safe-haven asset after comments from Federal Reserve officials cemented expectations of a US interest rate cut in September.

Spot gold gained 1.6pc to $2,460.99 per ounce by 11:32am ET, while US gold futures for August delivery rose 1.5pc to $2,465.80 per ounce.

“Gold surges to new all-time highs despite stronger-than-expected core retail sales data, encouraged by Powell indicating yesterday that the Fed was growing more confident that inflation was back on its way to target,” said Tai Wong, a New York-based independent metals trader.

“This essentially etches a September cut in stone barring an inflation calamity in the coming weeks.” Fed Chair Jerome Powell on Monday said recent inflation data bolstered policymakers’ confidence that price pressures are on a sustainable path to remain low, reassuring markets that the US rate cut is on the cards in September. San Francisco Fed Bank President Mary Daly also said “confidence is growing” that inflation is heading toward the US central bank’s 2pc goal.

Lower US interest rates put pressure on the dollar and bond yields, which increases the appeal of non-yielding bullion. Gold prices have risen more than 19pc so far this year, after a 13pc rise in 2023.

“Thanks largely to weakness in economic data, and falling inflationary pressures, bond yields are continuing to remain under pressure,” said Fawad Razaqzada, market analyst at City Index.

“This is helping to boost the appeal of low and zero-yielding assets, and thereby keeping the gold outlook positive.” Gold’s rise came despite a stronger dollar, with the US unit up 0.2pc against its rivals, after a reading of retail sales proved to be firmer than expected. Among other metals, spot silver rose 0.9pc to $31.29 per ounce, platinum gained 0.2pc to $997.13 and palladium climbed 0.7pc to $957.

Published in Dawn, July 17th, 2024