Gold (XAU/USD) surged to a record high of $2,670 per troy ounce on Wednesday, fueled by a surprising decline in U.S. Consumer Confidence data that heightened expectations for more aggressive easing and significant interest rate cuts from the Federal Reserve (Fed).
Lower interest rates typically enhance gold’s appeal, as they decrease the opportunity cost of holding the non-yielding asset. Additionally, the People’s Bank of China’s (PBoC) announcement of its largest stimulus push since the COVID-19 pandemic—featuring substantial borrowing cost cuts—further bolstered gold prices.
Escalating tensions in the Middle East, particularly following Israel’s intensified bombings of Hezbollah targets in Lebanon, have also driven safe-haven investments into gold.
The recent uptick in gold prices follows the Conference Board Consumer Confidence Index, which plummeted to 98.7 in September from a revised 105.6 in August, significantly underperforming the expected 103.9. This shift has raised market expectations for the Fed to implement another dual 50 basis points rate cut, with probabilities climbing to approximately 60% from 50% prior to the data release.
However, comments from Federal Reserve Governor Michelle Bowman, who holds a hawkish stance, tempered some of the negative sentiment. She suggested that beginning the rate-cutting cycle with a modest 25 basis point move might have better reflected the economy’s resilience. Bowman’s remarks scored a 7.0 on FXStreet’s FedTracker, which assesses the tone of Fed officials on a dovish-to-hawkish scale.
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