Gold hits new high as Fed rate-cut hopes dent dollar

Gold prices scaled a record peak on Tuesday, supported by a weaker dollar ahead of the Federal Reserve’s policy meeting this week, where the central bank is widely expected to cut borrowing rates.

Spot gold rose 0.1% to $3,681.18 per ounce as of 0326 GMT, after hitting a record high of $3,689.27 earlier in the session. US gold futures for December delivery were flat at $3,718.50.

“The sentiment is very bullish… markets are buying into rate cuts, going into this FOMC decision. The outlook remains strong for gold in the short to medium term,” said Kyle Rodda, an analyst at Capital.com.

“There’s a lot of dovishness baked into the rates curve, and if the Fed doesn’t support that in their guidance and forecasts, it could result in gold prices hitting an air pocket.

If the Fed backs market pricing though, that could be the catalyst to send it through $3,700.“

US President Donald Trump in a social media post on Monday called for Fed Chair Jerome Powell to enact a “bigger” cut to benchmark interest rates.

Traders are pricing in a near-certain 25-basis-point (bps) rate cut at the end of the two-day meeting on September 17, with a small chance of a 50 bps reduction, per the CME FedWatch tool.

Lower interest rates reduces the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

The dollar traded near a 2-1/2-month low against the euro and close to a 10-month trough versus the risk-sensitive Aussie.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), said its holdings rose 0.21% to 976.80 tonnes on Monday from 974.80 tonnes on Friday.

Meanwhile on Monday, a US appeals court refused to allow Donald Trump to fire Fed Governor Lisa Cook - the latest step in a legal battle that threatens the Fed’s longstanding independence.

Spot silver fell 0.4% to $42.52 per ounce, platinum fell 0.5% to $1,394.37 and palladium eased 0.3% to $1,180.64.