Gold prices reached a new peak on Tuesday, driven by a combination of factors including anticipation of additional U.S. interest rate reductions and stimulus initiatives in China, alongside heightened tensions in the Middle East, all contributing to increased demand.
By 1100 GMT, spot gold had climbed by 0.2%, reaching $2,633.25 per ounce, having earlier touched a new high of $2,639.95.
U.S. gold futures also saw a 0.2% increase, reaching $2,657.90. The precious metal has been setting new records following a significant 50 basis points reduction in interest rates by the U.S. Federal Reserve last week. Austan Goolsbee, President of the Bank of Chicago, anticipates several more cuts in the coming year.
UBS analyst Giovanni Staunovo commented, “The anticipation of another 50 bps reduction at the upcoming Fed meeting and the stimulus measures in China are propelling gold prices upwards.
While there’s always a risk of a price correction, it’s likely to be minor as investors who previously missed out on the rally will see any dip as a chance to increase their investments.”
In an effort to revive its economy from a deflationary slump, China’s central bank announced its most significant stimulus package since the pandemic.
Staunovo noted that this move presents a mixed outcome for gold demand in China; while lower interest rates should bolster demand, they may also make alternative investments like Chinese stocks and real estate more attractive.
The reduced interest rates diminish the opportunity cost associated with holding gold. Attention is now turning towards comments from Fed Chair Jerome Powell and the upcoming U.S. PCE data later this week, with Ricardo Evangelista, a senior analyst at ActivTrades, suggesting that gold prices could rise further if these events support a dovish market outlook.
Gold has seen a 27% increase in 2024, fueled in part by ongoing conflicts in the Middle East that have heightened its appeal as a safe-haven asset. Following a series of airstrikes, Israel’s military reported targeting multiple Hezbollah positions in southern Lebanon.
Commerzbank has updated its gold price forecast for the end of 2025, raising it to $2,600 from $2,550. Meanwhile, spot silver experienced a 0.7% increase to $30.87, platinum rose by 1.5% to $970.17, and palladium saw a 1.8% gain, reaching $1,060.25.