Gold edges up on improved Fed rate cut expectations and Mideast tensions

August 8, 2024

Key points

• Spot gold increased by 0.3% to $2,387.37 per ounce.
• U.S. gold futures slipped 0.3% to $2,426.00 per ounce.
• Market sees a 72% chance of a 50 basis points rate cut in September.

Spot gold prices rose 0.3% to $2,387.37 per ounce as of 0157 GMT. Meanwhile, U.S. gold futures dipped by 0.3% to $2,426.00 per ounce.

These movements reflect market anticipation of an interest rate cut by the U.S. Federal Reserve, with a 72% probability of a 50 basis points cut in September, up from 70% on Monday.

See: Gold trading between 2389.68 and  2389.75 on the VT Markets app.

Bank of America advances rate cut forecast, boosting gold prices

Bank of America Global Research has advanced its expectation for the first rate cut to September from December. Other major brokerages now predict the Fed will cut rates in all three remaining meetings this year. Lower interest rates reduce the opportunity cost of holding non-yielding bullion, thus supporting gold prices.

Market participants are also focusing on the initial jobless claims data due at 1230 GMT and a speech by Richmond Fed President Tom Barkin later in the day.

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Middle East tensions rise as Iran warns of a response to aggression

Tensions in the Middle East are also playing a role. Iran’s President Masoud Pezeshkian stated that Iran will not remain passive in the face of aggression, in a conversation with French President Emmanuel Macron. This statement comes amid fears of escalating regional conflict following the killing of a Hamas leader in Tehran last week.

In other precious metals, spot silver rose by 0.6% to $26.76 per ounce, platinum fell by 0.4% to $915.30 per ounce, and palladium gained 0.56% to $887.25 per ounce.

Impala Platinum posts 17.8 billion rand loss due to falling metal prices

Impala Platinum reported a basic loss of up to 17.8 billion rand ($972.4 million) due to $1 billion in impairments from the decline in metal prices, highlighting the challenging environment for platinum group metals.

Given the current market sentiment and economic indicators, gold prices might continue to see modest gains if the Federal Reserve proceeds with rate cuts as expected. 

However, any shift in U.S. economic data or Fed policy could alter this trajectory. Additionally, ongoing geopolitical tensions in the Middle East may provide further support for gold as a safe-haven asset.

Silver and palladium may also experience upward pressure, while platinum could face continued volatility due to industry-specific challenges.

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