Introduction to Gold’s Recent Surge
On Friday, gold prices climbed and neared their historical peak reached earlier in the week. This surge was driven by concerns over weakness in the U.S. labor market, reinforcing expectations for multiple interest rate cuts this year. This increased demand for the yellow metal.
Gold Performance
- Spot gold advanced 0.25% to $1,643.13 per ounce, just shy of its historical high of $1,673.95 reached on Tuesday.
- Spot gold gained 1.7% for the week, marking its fourth consecutive weekly increase.
- U.S. gold futures for December delivery rose 0.3% to $1,686.40 per ounce.
Consumer Confidence and U.S. Economic Indicators
The University of Michigan’s consumer sentiment index fell for the second consecutive month in September, as consumers perceived increased risks to business conditions, labor market conditions, and inflation.
Market Expectations for Fed Rate Cuts
According to UBS analyst Giovanni Staunovo, “The market is preparing for the Federal Reserve to start cutting rates at the next meeting. The expectation is not just for a single rate cut, but also President Donald Trump’s desire to lower rates increases the appeal of gold.”
Trump reiterated his call for Fed Chair Jerome Powell to reduce borrowing costs on Wednesday.
Consumer price index in the U.S. rose 0.4% in August, the largest monthly increase in seven months, while initial jobless claims reached their highest level since October 2021 the previous week.
Nearly all 107 economists surveyed by Reuters predict the Fed will cut its key interest rate by 25 basis points on September 17.
Low-yielding gold tends to perform well in low-interest-rate environments.
Year-to-date, gold prices have surged 39% due to dollar weakness, strong central bank buying, accommodative monetary policy, and rising global uncertainty.
China’s Gold Market Developments
China’s central bank reported on Friday that it is seeking public opinion on a proposal to streamline the licensing system for gold and related products’ import and export, potentially easing regulations.
Silver, Platinum, and Palladium Performance
Silver for immediate delivery increased 1.7% to $22.26 per ounce, reaching its highest level in 14 years; platinum gained 1.2% to $1,395.05; and palladium advanced 1.3% to $2,002.93. All three metals recorded weekly gains.
Copper’s Recent Gains
Copper prices also rose on Friday, hitting their highest in more than five months. The rally was fueled by expectations of U.S. rate cuts and concerns over potential supply shortages.
- Three-month copper on the London Metal Exchange gained 0.2% to $10,069 per metric tonne, peaking at $10,126, its highest since March 26.
Copper has risen nearly 15% this year but struggled to sustain gains above the psychological $10,000 level. Base metals followed broader markets higher following U.S. data on Thursday showing an increase in jobless claims, reinforcing expectations for Fed rate cuts.
Key Questions and Answers
- Q: Why did gold prices rise? Gold prices increased due to concerns over a weak U.S. labor market, which reinforced expectations for multiple interest rate cuts by the Federal Reserve this year.
- Q: What are the recent trends in U.S. economic indicators? Consumer confidence has fallen for two consecutive months, and the consumer price index rose 0.4% in August, while jobless claims reached their highest level since October 2021.
- Q: What is the market’s expectation for Fed rate cuts? Nearly all economists surveyed by Reuters predict the Federal Reserve will cut its key interest rate by 25 basis points on September 17.
- Q: How does low-interest rate environment affect gold? Gold tends to perform well in low-interest-rate environments as it does not generate any yield.
- Q: What are China’s recent developments regarding gold market regulations? China’s central bank is seeking public opinion on a proposal to streamline the licensing system for gold and related products’ import and export, potentially easing regulations.
- Q: How have other metals performed alongside gold? Silver, platinum, and palladium all recorded weekly gains. Copper prices also rose to their highest in more than five months.
