Gold prices skyrocketed above the $2,600 threshold on Friday, driven by expectations of further U.S. interest rate cuts and escalating geopolitical tensions in the Middle East. This marks the first time gold has crossed the historic $2,600 mark, adding momentum to a rally that has seen the precious metal climb 26% year-to-date—the largest annual increase since 2010.
Spot gold rose 0.7% to $2,605.50 per ounce by 10:05 a.m. ET (1405 GMT), while U.S. gold futures advanced by 0.6%, reaching $2,630.30. Silver also benefited from the trend, gaining 0.5% to trade at $30.93 per ounce.
Fed Rate Cuts Fuel Gold’s Ascent
The surge in gold prices follows the Federal Reserve’s aggressive easing cycle initiated earlier this week, in which the central bank slashed interest rates by 50 basis points. Gold, which offers no yield, tends to benefit when interest rates fall, making it more attractive to investors as a store of value.
Daniel Ghali, a commodity strategist at TD Securities, highlighted that continued buying activity after the Fed’s decision contributed to the rally, although he noted the market positioning appeared “extreme,” with relatively modest inflows into gold-backed exchange-traded funds (ETFs) and subdued buying from key markets like China and India.
Geopolitical Risks Bolster Safe-Haven Demand
In addition to Fed policy, rising geopolitical risks—particularly ongoing conflicts in Gaza and Ukraine—have bolstered gold’s reputation as a safe-haven asset. “Geopolitical risks will sustain gold’s safe-haven demand,” said Fawad Razaqzada, an analyst at Forex.com, pointing to the Middle East as a key source of uncertainty.
Analysts also pointed out that continued weakness in the U.S. dollar has added tailwinds to gold’s rally. As the dollar depreciates, gold becomes cheaper for international investors holding other currencies, further supporting its price gains.
Potential for Correction?
Despite the recent rally, some analysts are warning of a potential correction in gold prices. The recent surge has dampened retail demand in top-consuming nations like China and India, and with the Fed expected to implement only smaller, 25-basis-point cuts at its next meetings, the upward momentum could lose steam. Commerzbank, in a note, suggested the rally “should not go on forever.”
Other Precious Metals Weaken
While gold enjoyed strong gains, other precious metals faced declines. Platinum dropped 1.1% to $974.76 per ounce, while palladium fell 1.7% to $1,062.25, as both metals remained under pressure from sluggish industrial demand.
The market’s focus remains firmly on gold, with traders closely watching developments in both monetary policy and geopolitical landscapes for further indications of where prices might head next.
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