A weak US dollar and investor confidence in a US interest rate cut helped push gold prices up to $2,531 at the start of the week.
"The main reason driving up gold prices is the demand for financial investments, especially from ETFs. Investor confidence in general has also improved as they expect the US Federal Reserve (Fed) to cut interest rates at its September meeting," said Aakash Doshi, Head of Commodities for North America at Citi Research. He predicts that gold prices could reach $2,600 by the end of this year and $3,000 per ounce by mid-next year.
Yesterday, reserves at the SPDR Gold Trust – the world's largest gold ETF – also reached a seven-month high of 859 tonnes. The CME FedWatch interest rate tracker indicates that the market is now betting on a 71% probability of the Fed cutting interest rates by 25 basis points (0.25%) in September.
This week, investors will be closely watching information from the Fed, including the minutes of the July meeting, to be released on August 21, and a speech by Fed Chairman Jerome Powell on August 23.
Since the beginning of the year, gold prices have risen by more than 20%. The precious metal is heading towards its strongest annual gain since 2000. " Geopolitical volatility, speculative demand, and increased buying by ETFs are all supporting gold prices," said Joseph Cavatoni, market strategist at the World Gold Council.
Except for gold, other precious metals fell in price yesterday. Silver dropped 0.2% to $29.40 an ounce. Platinum lost 0.5% to $949. Palladium declined 0.5%, closing at $927.
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