Gold prices rose to record levels in Asian trading on Wednesday, extending strong gains on growing optimism that the US Federal Reserve will cut interest rates in September.
The price of spot gold rose 0.2% to a record $2,478.65 an ounce, while gold futures expiring in August hit a record $2,483.65 an ounce.
Gold rose amid expectations of a rate cut.
The rise in gold prices was driven primarily by optimism about interest rate cuts by the Federal Reserve.
Weak data on consumer price inflation in the US and signals from the Federal Reserve have led traders to actively prepare for a rate cut in September.
Traders put the likelihood of a 25 basis point rate cut in September at more than 90%, with a slight chance of a 50 basis point rate cut, according to CME’s Fedwatch tool. They are also no longer assessing the likelihood that the Fed will leave rates unchanged.
Weak retail sales data on Tuesday bolstered the view that the US economy is “cooling”, even though figures were slightly better than expected.
A lower rate favors gold and other precious metals as they represent a lower opportunity cost of investing in the sector.
The dollar fell to more than a month low on prospects of a rate cut, further boosting precious metals prices. Other precious metals also rose as the dollar weakened, with platinum futures up 0.1% at $1,016.80 an ounce and silver futures up 0.3% at $31.543 an ounce.