Key points:
Gold prices (Symbol: XAUUSD) edged higher, trading at $2,461.27 per ounce. This is a price level not far from the record high of $2,483.60 set in the previous session. As anticipation of a US interest rate cut in September rises, this turns into a significant factor boosting demand for gold.
The image above shows the how gold is under pressure, as observed on the VT Markets app.
Apart from the increased probability of Fed rate cut in September, the overall market sentiment has been further bolstered by comments from Fed officials.
Fed Governor Christopher Waller and New York Fed President John Williams have both indicated a shorter horizon toward looser monetary policy. Additionally, Richmond Fed President Thomas Barkin expressed optimism about the cooling in inflation.
Lower interest rates generally increase the appeal of non-yielding bullion, pushing gold prices higher.
The upcoming US elections and potential global trade wars, especially between the US and China, could further boost precious metals as investors seek to hedge their equity and currency exposures.
That being said, gold could rise to a price level ranging between $2,700 to $3,000 over the next 6 to 12 months, regardless of the outcome of the US election. This outlook is driven by both the expectation of lower interest rates and potential geopolitical tensions.
The rising expectations for a Federal Reserve rate cut, combined with economic and geopolitical uncertainties, will likely keep gold on an upward trajectory. Traders should be ready to take advantage of these trends while keeping risk management intact.
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