Gold soars to new all-time highs amid rising rate cut expectations
Gold prices surge towards $2,500, hitting record highs as expectations for September rate cuts grow. Discover how falling inflation and softening interest rates are driving this historic rally.
Key points
- Gold futures hit a new all-time high above $2,480 on Wednesday
- Prices most recently passed $2,400 after softer-than-expected CPI inflation data
- CME futures markets are predicting a 98% chance of a Fed rate cut in September
- GBP/USD hit 1.3000, a yearlong high, amid reverberating dollar weakness
Gold prices near $2,500 after highest daily close
Gold futures reached a monumental milestone this week, closing Tuesday over $2465—a record-setting figure. Throughout today's trading, prices surged past $2480 but experienced a reversal during the US session. This year, gold had only briefly surpassed the $2400 mark in April and May, showcasing its unprecedented recent ascent.
Gold rally spurred by soft inflation
Gold's surge gained momentum last week following the release of US CPI data, which reported the lowest inflation rate since 2021. With inflation typically influencing interest rate decisions, this lower-than-expected rate suggests potential upcoming reductions in interest rates, bolstering gold's appeal.
Rate cuts likely to begin in September
Recent CPI data combined with confirmations from Fed Chair Powell strongly indicate that rate cuts may commence as soon as the September meeting; CME futures markets now reflect a 98% probability that overnight rates will be reduced by at least 25 basis points.
Gold prices moving inversely to interest rates
Gold prices and interest rates often move in opposite directions, evidenced by a three-month correlation of -0.35 between 10YR Treasury yields and gold futures. As expectations grow for federal rate cuts, yields on treasuries have declined, enhancing gold's attractiveness as a non-interest-bearing asset.
US dollar falling on rate cut speculation
The speculation around federal rate cuts has also impacted the US dollar, driving it down against major currencies. In today's trading, GBP/USD reached a new high for the year at 1.3000, reflecting the ongoing adjustments in forex markets due to anticipated US monetary policy changes.
How to trade US dollar
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on USD pairs
Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.