Gold rises to record high as US data supports deeper rate cuts

(Bloomberg) — Gold climbed to a record high after rising more than 1 percent in the previous session, as weak U.S. data bolstered the case for deeper rate cuts. Silver was near a four-month high.

Bloomberg’s most read

Gold prices rose as much as 0.3% to more than $2,665 an ounce, eclipsing the previous all-time high announced on Tuesday, following a report showing that this month US consumer confidence fell by the most in three years . Silver rose 4.6% on Tuesday, its biggest daily gain in four months.

Swap traders have increased bets by more than three-quarters of a percentage point on Federal Reserve easing this year. Lower rates tend to benefit both gold and silver because they don’t pay interest, while a weaker dollar makes the metals cheaper for many buyers.

Gold and silver tend to move largely in tandem as they both offer similar macro and currency hedging properties. However, the white metal is more exposed to the business cycle because it is also an industrial commodity used in clean energy technologies, including solar panels.

In a boost to industrial metals, Beijing on Tuesday announced a series of stimulus measures to address the nation’s economic malaise and particularly target the housing market.

“The main driver for silver in recent weeks has been the rise in gold – which got a fresh boost yesterday on higher rate cut expectations following a weak consumer confidence report,” said Zhong Liang Han, analyst at Standard Chartered Plc. However, “the rebound in industrial metals following China’s broad stimulus package was the key driver behind the next stage of growth in silver.”

Gold is now up nearly 30% this year – while silver is up 35% – with rallies gaining momentum after the Fed’s half-point rate cut last week. The yellow metal was also supported by strong central bank purchases and heightened geopolitical tensions that have fueled demand for safe havens. A US presidential election is now less than six weeks away, which could have massive consequences for financial markets.

Spot gold hit a record high of $2,665.25 an ounce before rising 0.2 percent to $2,662.77 as of 10:34 a.m. in Singapore. The Bloomberg Dollar Spot Index was little changed after falling 0.5% in the previous session.

Silver is getting attention given gold’s surge, especially as investors look for recovery buying opportunities, said Joni Teves, precious metals strategist at UBS Group AG.

The story continues

“The movement of industrial goods will probably also provide an additional boost,” Teves said. “Our bullish outlook for silver is unchanged; we believe it can outperform in this environment of rising gold prices, Fed easing and projected silver market shortfalls.”

Silver fell 0.5 percent in Singapore to $31.9435 an ounce. Palladium and platinum fell.

Looking ahead, investors await more US data – including the personal consumption expenditure indicator and jobless claims – due later in the week for further indications of the Fed’s likely easing path.

Bloomberg Businessweek’s most read

©2024 Bloomberg LP