Gold Surpasses $2,600 Barrier as Fed Rate Cut Speculations Extend Historic Rally By Reuters

Gold Prices Surge Amid U.S. Rate Cuts and Geopolitical Tensions

By Anushree Mukherjee

Gold prices crossed the $2,600 mark for the first time on Friday, fueled by expectations of further interest rate cuts in the U.S. and escalating tensions in the Middle East.

As of 1:43 p.m. ET, gold was trading at $2,620.63 per ounce, reflecting a 1.3% increase. Meanwhile, U.S. gold futures rose by 1.2% to reach $2,646.20.

The recent surge in gold prices was catalyzed by the Federal Reserve’s announcement of an aggressive easing cycle on Wednesday, which included a half-percentage-point rate cut. This move has increased gold’s attractiveness as an investment since it does not yield interest.

In 2024, gold prices have climbed by 27%, marking the largest annual gain since 2010, as investors seek refuge from uncertainties arising from various global conflicts. However, analysts suggest that the current rally may be due for a correction.

“There’s definitely ongoing buying activity linked to the Fed’s significant cut,” said Daniel Ghali, a commodity strategist at TD Securities. However, he noted that “the source of this buying remains unclear,” with relatively modest ETF inflows and minimal interest from Asian buyers, indicating "extreme positioning."

The surge in gold prices has negatively impacted retail demand in major markets, particularly in China and India.

Commerzbank, in a recent analysis, indicated that the rally in gold prices might not be sustainable, especially as expectations are set for smaller rate cuts of just 25 basis points at the Federal Reserve’s next two meetings.

Nonetheless, some analysts argue that gold may continue to see further increases. “Geopolitical risks, including ongoing conflicts in Gaza and Ukraine, will likely maintain gold’s appeal as a safe-haven asset,” said Fawad Razaqzada, an analyst at Forex.com.

Additionally, the weakness of the dollar has contributed to gold’s rise, making it more affordable for international investors.

In related markets, spot silver rose by 1.2% to $31.16, while platinum decreased by 1.1% to $978.50, and palladium saw a 0.5% decline to $1,074.84.