Market momentum for gold temporarily halts its historic surge as attention shifts towards the Federal Reserve's upcoming meeting.
The gold market is abuzz with anticipation as the Federal Reserve may signal that follow-up rate cuts are likely to arrive before the end of the year. This potential move could reduce the opportunity cost of holding non-yielding bullion, making gold a more attractive investment option.
On Wednesday, gold prices dipped, with US gold futures for December delivery easing 0.2% to $3,718.90. However, the previous day saw gold reach a record high of $3,702.95, a testament to the metal's allure amidst uncertain economic conditions. The decline in the dollar, which contributed to gold's ascent to $3,700, also played a significant role.
The US Fed chair, Jerome Powell, is expected to deliver a quarter-percentage-point rate cut later in the day. This move, if confirmed, would further reduce the yield on the benchmark US 10-year treasury yields, which have been hovering near a more than five-month low.
Meanwhile, the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, saw its holdings rise by 0.32% to 979.95 metric tonnes on Tuesday. The increase suggests that investors are turning to gold as a safe haven amidst economic uncertainties.
Profit-taking around the $3,700 level caused gold to dip below this mark, but the metal quickly recovered, demonstrating its resilience and continued demand.
Elsewhere in the precious metals market, spot silver slipped 1.3% to $41.98/oz, while platinum gained 0.1% to $1,392.25. Palladium, on the other hand, rose 0.5% to $1,182.21.
The European Central Bank decided on September 11, 2025, to keep all three key interest rates unchanged, with the deposit rate remaining at 2.0 percent. This decision maintained stable money market interest rates on that day.
US President Donald Trump has called for Powell to enact a "bigger" rate cut. His comments echo the sentiments of many investors who are eager for the Federal Reserve to take action to stimulate the economy.
Despite the positive outlook for gold, there are potential downsides to consider. US retail sales increased more than expected in August, but a weakening labor market and rising prices due to tariffs pose a downside risk to continued strength in spending.
In conclusion, the gold market is showing signs of resilience amidst economic uncertainties, with investors turning to the metal as a safe haven. The Federal Reserve's anticipated rate cuts could further boost gold prices, but potential downsides such as a weakening labor market and rising prices due to tariffs need to be closely monitored.
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