Why gold prices just hit a new record
- The price of spot gold topped $2,500 per ounce on Friday, a new all-time high.
- The metal is rising on confidence that interest-rate cuts are imminent.
The price of spot gold climbed past $2,500 an ounce to a new record on Wednesday.
The precious metal has rallied more than 20% this year on anticipation that interest rates could eventually ease. Since gold offers no yield, traders consider it a better investment when central banks slash rates.
For this same reason, spot gold jumped as much as 1.8% on Friday as fresh housing data gave investors renewed reason to bet on lower interest rates.
In July, new home starts dropped to their lowest level since 2020, the Commerce Department reported. This finding adds on to concerns over the economy's strength, especially after recent weakness in inflation and labor prints.
These reports have raised questions about whether interest rates are too restrictive. To reverse this, markets project that the Federal Reserve will ease policy by at least 25 basis points next month.
Last month, JPMorgan forecast that Fed cuts would extend the gold rally but predicted that gold would hit the $2,500 mark in the fourth quarter.
Some analysts have raised their outlooks for where the bullion metal could be headed in the long term.
According to Alex Kuptsikevich, senior market analyst at FxPro, gold could eventually trade between $2,800 and $2,900. That's based on how the metal moved from a bottom in October 2022 through September 2023, he wrote on Friday.
Separately, Trade Nation senior market analyst warned that profit-taking could come, pulling gold down to trade in the $2,450 range.
While interest rate outlooks have been a central rally driver, persistent geopolitical and domestic tensions have fanned the bull run. The bullion metal is a reputed safe-haven commodity that garners investments when risk and uncertainty are high.
This year, military conflicts in Europe and the Middle East have contributed to this, while the possibility of a second Donald Trump presidency has also sent gold higher, sources told the Financial Times in July.
Upside momentum in the metal has been steady through this month, moving in line with equities, Kuptsikevich said. Worth noting, however, is that the yellow metal experienced a less aggressive drop during the stock market's August sell-off, outpacing the rally.