Gold prices rose on Tuesday, approaching the record high of $2,449.89 hit on May 20. The upward move comes in response to comments from Federal Reserve Chairman Jerome Powell, which reinforced the case for a September rate cut. XAU/USD is trading at $2,440.42, up $18.03 or +0.74%.
During a speech at the Economic Club in Washington, D.C., Powell indicated that the Fed would not wait for inflation to reach 2% before considering a rate cut. He stressed the importance of acting proactively because of the delay in policy impacts. Powell’s comments have increased investor confidence in potential rate cuts, sending gold prices higher..
Recent inflation data showed signs of slowing, with the June CPI report indicating prices falling month-on-month. Powell expressed optimism about the economic outlook, noting that a “sharp landing” of the US economy is unlikely. These factors contribute to bullish sentiment in the gold market..
Central Bank purchases and ETF flows
While the central bank’s purchases of gold have slowed in recent months, particularly due to lower purchases from China, global exchange-traded gold funds (ETFs) have seen a rebound in demand. The World Gold Council announced inflows of $0.5 billion, or 7.6 metric tons, to gold ETFs last week. This renewed interest from institutional investors is supported by the current upward trend in gold prices..
The outlook for gold remains bullish in the short term, despite being overvalued by 7% at the end of June. The expectation of upcoming rate cuts in the US is likely to lead to higher prices, which could lead to new record highs. However, investors should be prepared for potential volatility in the third quarter as markets await concrete signals from the Fed..
Barrick Gold shares rise after preliminary production figures released
Barrick Gold (NYSE:GOLD) shares traded slightly higher, up 0.44% in Tuesday’s pre-market session after the company released preliminary production figures for the second quarter and said it was on track to meet its full-year gold and copper guidance.
Barrick said it produced 948,000 ounces of gold and 43,000 tonnes of copper, and reported preliminary second-quarter sales of 956,000 ounces of gold and 42,000 tonnes of copper. Gold and copper production is expected to increase gradually with each quarter as previously described, with weight gain in the second half. The average price of gold was $2,338 per ounce and copper was $4.42 per pound in the second quarter.
The increase in gold production at Turquoise Ridge as well as the completion of maintenance work on the Sage sterilizer in the first quarter contributed to the increase in gold production in the second quarter compared to the first quarter. “These increases were partially offset by planned production declines in Cortez and Phoenix. The company said in its statement that Pueblo Viejo’s production was flat respectively as productivity increased with the shift to an improved recovery rate in the second half of 2024.
Meanwhile, higher grades and recoveries in Lumwana after intensified stripping activities and planned closure in the first quarter contributed to an increase in copper production in the second quarter.
While sustainability costs are expected to be 1-3% higher for both gold and copper in the second quarter, costs are expected to decline in the second half as production increases.
We advise traders to keep a close eye on upcoming US economic data, especially retail sales figures due later today, for more information on the Federal Reserve’s potential policy decisions and their impact on gold prices.
Expectations of a rate cut and boost Trump’s chances raise gold
Gold rose towards a record high as expectations of a rate cut by the US Federal Reserve grew and traders intensified their bets on Donald Trump’s second presidency.
Spot bullion rose 0.8 percent to just under $2,443 an ounce after increasing on Monday to around $11 from a peak in late May. Traders expect a quarter-point cut in interest rates this year — a move that would traditionally benefit the interestless yellow metal — as inflation eases.
Gold is up nearly 20 percent this year, buoyed by expectations of federal interest rate cuts, as well as large purchases by central banks. Ongoing geopolitical tensions have also supported the precious metal, traditionally seen as a safe-haven asset.
Optimism about US interest rate cuts with more economic data supporting the Fed’s turnaround case supports gold.” “Gold is poised to maintain its positive momentum amid the current global geopolitical and macroeconomic landscape, while central bank demand is expected to grow.
Federal Reserve Chairman Jerome Powell said on Monday that the latest data has given policymakers more confidence that inflation is heading toward the central bank’s 2 percent target.
Meanwhile, Trump’s candidacy gained momentum after a failed assassination attempt over the weekend and the judge dismissed a criminal case against him. The Dow Jones Industrial Average hit an all-time high on Monday
Trump’s presidency could have both positive and negative effects on gold. That could lead to “tax cuts, support for the shift to equities, and ultimately limit faster interest rate cuts,” he said.
On the other hand, he said that tax cuts would lead to a deterioration in US financial balances, which could weaken the dollar’s position and push buyers towards safe-haven assets such as gold.
