Gold price hits fresh record high, over $2,700 mark

Gold price climbed for the fourth consecutive day, reaching a new all-time high on Friday. Ongoing rate cuts from major central banks have been advantageous for non-yielding assets like XAU/USD. Additionally, tensions in the Middle East and uncertainty in US politics have further fueled demand for the commodity.

Gold prices (XAU/USD) surged past the $2,700 mark on Friday, setting a new record high as expectations for interest rate cuts by major central banks and a more accommodative monetary policy environment took hold. Geopolitical risks from ongoing conflicts in the Middle East and uncertainty surrounding the US Presidential election have also boosted demand for this safe-haven asset.

These factors have largely countered the recent rally of the US Dollar (USD), which has reached its highest level since August, driven by a consensus that the Federal Reserve will implement modest rate cuts. Typically, a stronger dollar can dampen demand for USD-denominated commodities like gold. However, gold continues to trend upward, poised for significant weekly gains.

Gold price continues to draw support from a combination of factors

On Thursday, the European Central Bank announced its third interest rate cut of the year, marking the first consecutive reductions in 13 years, and signaled the possibility of further cuts amid a deteriorating economic outlook. The Federal Reserve is also expected to continue lowering borrowing costs after a significant rate reduction in September. Additionally, disappointing inflation data from the UK has strengthened expectations for more aggressive easing from the Bank of England.

The closely contested race between Donald Trump and Kamala Harris adds further uncertainty, while the potential for escalating conflicts in the Middle East has driven gold prices to a new all-time high.

The Israeli military confirmed the death of Hamas leader Yahya Sinwar on Wednesday after a year-long pursuit. Meanwhile, Hezbollah, backed by Iran, declared a new and escalated phase in its conflict with Israel.

In economic news, data from the US Census Bureau released on Thursday showed that retail sales rose by 0.4% in September, exceeding market expectations of a 0.3% increase and improving from a 0.1% rise the previous month. Additionally, the US Labor Department reported a decrease in initial jobless claims to 241,000 for the week ending October 12, down from a record high earlier in the year and better than the anticipated 260,000.

US election uncertainty and monetary easing

Bullion has surged over 30% this year, reaching multiple record highs, driven by expectations of further Federal Reserve rate cuts and ongoing geopolitical tensions.

Nitesh Shah, commodity strategist at WisdomTree, noted, “In addition to the concerns in the Middle East, the upcoming US election appears to be highly competitive, creating significant uncertainty. Gold often becomes a go-to asset in such times.”

Delegates at the London Bullion Market Association’s annual gathering earlier this week projected prices could rise as high as $2,941 an ounce within the next year. Ole Hansen, head of commodity strategy at Saxo Bank, commented, “The LBMA poll from Miami suggested gold prices could approach $3,000 in the next year, with silver potentially outperforming, which is attracting attention.”

Earlier in the session, gold prices retreated slightly from record highs after data revealed US retail sales increased more than expected in September, and a Labor Department report indicated that unemployment unexpectedly fell last week. These mixed economic signals reinforced traders’ expectations that the Federal Reserve will continue its rate-cutting strategy for the remainder of the year.

“These are positive data points,” said Bob Haberkorn, senior market strategist at RJO Futures. “I believe the Fed aims to lower rates further, likely implementing another quarter-point cut before the year ends. As rates decrease, gold should strengthen.”