Gold prices reached an unprecedented peak on Tuesday, marking a sixth consecutive session of increases, driven by a depreciating dollar and heightened expectations of a U.S. interest rate reduction this month. Spot gold experienced an increase of 0.5%, reaching $3,492.26 per ounce, following its peak at $3,508.50. U.S. gold futures for December delivery increased by 1.4%, reaching a price of $3,563.40.
“A corollary of the weaker economic backdrop and expectations of US rate cuts is boosting precious metals,” stated Kyle Rodda. “Another factor is the ongoing confidence crisis in dollar assets due to U.S. President Donald Trump’s assault on the independence of the Federal Reserve.” Trump has expressed criticism towards the Federal Reserve and its chair, Jerome Powell, for an extended period regarding the lack of rate reductions, and has recently targeted Powell concerning an expensive renovation of the central bank’s Washington headquarters.
On Monday, Treasury Secretary Scott Bessent articulated that the Federal Reserve is and ought to remain independent; however, he acknowledged that it has “made a lot of mistakes.” He also supported Trump’s authority to dismiss Fed Governor Lisa Cook in light of allegations concerning mortgage fraud. Market participants are currently assigning a 90% probability to a 25-basis-point reduction in the Federal Reserve’s interest rate on September 17. Gold, which does not yield interest, generally exhibits strong performance in an environment characterized by low interest rates.
Expectations for rate cuts and concerns regarding the Federal Reserve’s independence have exerted downward pressure on the U.S. dollar, which is currently hovering near a low not seen in over a month against its counterparts, thereby reducing the cost of gold for international purchasers. On Friday, data revealed that the U.S. personal consumption expenditures price index increased by 0.2% on a month-on-month basis and 2.6% on a year-on-year basis, aligning with market expectations.
Investors are anticipating the release of the U.S. non-farm payrolls data scheduled for Friday, which will provide insights into the magnitude of a projected Federal Reserve rate cut later this month. In other markets, spot silver experienced a decline of 1.5%, settling at $40.61 per ounce, following a peak not seen since September 2011 in the prior session. Platinum increased by 1.6% to $1,417.16, while palladium decreased by 0.9% to $1,126.63.