On a record hunt

The week kicked off with new record highs for gold prices across nearly all currencies. According to various media reports, this was due to the fact that more robust interest rate cuts by the Fed were increasingly priced into the futures markets. The lower the US (key) interest rates or yields, the more of a tailwind for gold, which pays neither interest nor dividends.

However, gold prices had continued to rise steadily last week. Data suggests that investor demand for gold ETCs continued globally in August, with investors seeking the yellow metal particularly in North America and Europe. Major speculative investors also took a liking to the precious metal – their purchase positions rose by 17 per cent in August month on month and reached the highest level since February 2020, the month of the first COVID lockdowns.

Gold price reacts to US key interest rate cut

Finally, the Fed meeting took place yesterday evening, marking the highlight of the week. The range of key interest rates was down 0.5 percentage points to between 4.75 and 5 per cent. The Fed had previously not changed its rates for 14 consecutive months. Fed governors expect an average key interest rate of 4.4 per cent at the end of the year. This points to a further major step of 0.5 percentage points or two small steps of 0.25 percentage points each downwards (although the latter appears more likely). For the coming year, the Fed is expecting an average key interest rate of 3.4 per cent – which could, for example, mean four further interest rate cuts of 0.25 percentage points each. In an immediate reaction to this major interest rate move, the gold price reached 2,600 US$ per ounce for the first time. However, prices retreated towards the end of the day, likely due to profit taking.

Gold touches 2,600 US$ per ounce

On Thursday morning two weeks ago, gold stood at 2,500 US$ per ounce. After a few days of sideways trading, US consumer price data, which probably sealed the Fed’s interest rate turnaround, prompted the gold prices to jump above their previous 2,600 US$ per ounce and then-record high. From 2,520 on the morning of 12 September, it jumped to 2,560 in the evening. On Friday and Monday of this week, it continued to rise to a new record high of US$2,589.75. With a slight rise in yields in the run-up to yesterday’s Fed meeting, it dropped to 2,560 US$ per ounce on Tuesday, and immediately after the meeting hit 2,600 (or 2,335 € per ounce, also a record high), before returning to 2,550 US$ per ounce – due to the aforementioned profit-taking. This morning at around 7:00, gold started European trading at around 2,568 US$ per ounce.

Xetra-Gold above 74 € per gram

Xetra-Gold also rose to a new record high, initially climbing from 72.60 € per gram on Thursday morning two weeks ago to 74.85 last Friday. However, it then receded to 74.40 yesterday afternoon. This morning, Xetra-Gold is likely to start the European trading day at a slightly lower level of around 74.25 – not that far from the record high.

Over the next few days, various central bank meetings with market-moving potential are scheduled. Otherwise, the markets will first have to digest last night’s Fed interest rate decision.

I wish all readers a few last warm and sunny days of late summer.