Gold (XAU/USD) experienced a slight pullback on Monday after reaching a new all-time high of $2,631 earlier in the day. This surge in price reflects ongoing market expectations for more aggressive interest rate cuts by the Federal Reserve (Fed), alongside rising geopolitical tensions in the Middle East that have boosted safe-haven demand for the precious metal.
Lower interest rates enhance gold’s appeal since they reduce the opportunity cost of holding a non-yielding asset like gold. The recent decision by the People’s Bank of China (PBoC) to cut its 14-day reverse repo rate by 10 basis points to 1.85% and inject additional liquidity into the financial system likely further increased gold’s attractiveness.
Market Anticipation for Fed Rate Cuts
Gold prices rallied to new highs as traders speculate on the potential for another substantial rate cut from the Fed before the end of the year. Currently, there is a 51.6% probability of a 50 basis point cut at the Fed’s November meeting, compared to 48.4% for a 25 basis point cut, according to the CME FedWatch tool.
Comments from Patrick Harker, President of the Philadelphia Fed and a voting member, suggest caution despite signs of a softening labor market. He noted the risk of inflation stalling, which registered a 5.8 on FXStreet’s FedTracker, indicating a slightly dovish sentiment among Fed officials.
You Might Be Interested In
- Gold Hits New Record High Amid Global Central Bank Easing Expectations
- Gold Prices Hover Around $2,620 Amid Fed Cuts and Middle East Tensions
- Gold Prices Surge Above $2,600 Amid Fed Speculation and Middle East Tensions
