Gold extends record rally as Fed rate-cut bets dent dollar, yields

Gold prices scaled a fresh peak on Tuesday, as a weaker dollar and a dip in bond yields amid growing bets for a Federal Reserve rate cut this month lifted demand for the precious metal.

Spot gold gained 0.5% to $3,651.96 per ounce as of 0430 GMT.

US gold futures for December delivery added 0.4% to $3,690.90.

“We probably will see more upside in gold from here provided that the US central bank delivers with regards to market expectations of seeing multiple rate cuts,” KCM Trade Chief Market Analyst Tim Waterer said.

US job growth weakened sharply in August and the unemployment rate increased to a nearly four-year high of 4.3%, confirming that labour market conditions were softening and sealing the case for a Fed rate cut next week.

Traders are pricing in an 89.4% chance of a 25-basis-point Fed rate cut at this month’s meeting and a 10.6% probability of a jumbo 50-basis-point cut, per the CME Group’s FedWatch tool.

Lower interest rates pressure the dollar and bond yields, raising the appeal of the non-yielding bullion.

The dollar index fell to an almost seven-week low against its rivals, making gold more attractive for other currency holders, while the benchmark US 10-year Treasury yield dropped to a five-month low.

Meanwhile, the European Central Bank is widely expected to hold rates at its meeting on Thursday.

Investors are now awaiting the US producer price data on Wednesday and consumer price data on Thursday for further clues into the Fed’s policy path.

“A potential short-term catalyst would be if US inflation data comes in below expectations this week, which could see the Fed dial up their dovish levels at their September meeting and could hasten gold’s ambitions of hitting the $3,700 level,” Waterer said.

Gold prices have gained 38% so far this year, following a 27% jump in 2024, bolstered by a soft dollar, strong central bank accumulation, dovish monetary settings and heightened global uncertainty.

Elsewhere, spot silver rose 0.1% to $41.36 per ounce.

Platinum gained 0.8% to $1,393.95 and palladium climbed 0.8% to $1,142.73.