Gold breaks $2,600 barrier as Fed tapering bets extend historic run Reuters

By Anushree Mukherjee

(Reuters) – Gold climbed above $2,600 for the first time on Friday, extending a rally fueled by bets on further U.S. interest rate cuts and rising tensions in the Middle East.

rose 1.3 percent to $2,620.63 an ounce by 1:43 pm ET (1743 GMT), while the U.S. settled 1.2 percent higher at $2,646.20.

Bullion’s latest rally got a boost after the Federal Reserve kicked off an aggressive easing cycle on Wednesday with a half-percentage-point cut, adding to the call for non-interest-bearing gold.

Prices of the safe-haven asset rose 27% in 2024, their biggest annual gain since 2010, as investors also sought to hedge uncertainties caused by protracted conflicts in the Middle East and elsewhere.

The record rally could be set for a correction, analysts said.

“There is clearly still some buying activity associated with the Fed’s decision to start its easing cycle with a big cut,” said Daniel Ghali, commodities strategist at TD Securities.

However, “the source of this buying activity remains off our radar,” with ETF inflows relatively marginal and Asian buyers still on strike, all signs of “extreme positioning,” Ghali added. (GOL/ETF)

The record rally eroded retail demand in top consumers China and India. (NAKED)

Gold’s rally “should not continue forever,” Commerzbank (ETR: ) said in a note, citing expectations for cuts of just 25 basis points each at the next two Fed meetings.

However, some analysts said gold could see more upside.

“Geopolitical risks such as ongoing conflicts in Gaza, Ukraine and elsewhere will ensure safe haven demand for gold is supported,” Forex.com analyst Fawad Razaqzada said in a note.

The continued weakness of the dollar, which makes gold cheaper for holders of other currencies, provided additional tailwinds, analysts said. (USD/)

Elsewhere, spot silver gained 1.2% to $31.16. Platinum was down 1.1% at $978.50 and palladium was down 0.5% at $1,074.84.