LONDON: Gold prices hit a record high on Tuesday (Aug 20) as a weaker dollar and buying by Western investors extended the precious metal’s rally.
Spot gold broke to a fresh record above US$2,520 – a third successive day of new peaks – on bets that the Fed would cut interest rates, making the yellow metal more attractive to investors.
The dollar meanwhile touched a seven-month low on Tuesday with traders bracing for comments from Federal Reserve chair Jerome Powell on Friday.
“Gold is effectively trading in line with expected cross-asset correlations, albeit being driven more by the FX side rather than rates at the moment,” said Marcus Garvey, head of commodities strategy at Macquarie.
“From a flow perspective, it’s quite notable that it’s coming much more from Western investor buying than anything else,” he added.The Chinese gold price arbitrage is weak with the Shanghai Futures Exchange price trading below the Comex price as high prices have muted demand in China, the top gold consumer, in recent months.
Meanwhile, Swiss July gold exports rose to the highest since April as higher supplies to India and Britain offset reduced shipments to China, customs data showed.
With recent data indicating that US inflation is slowing and the labour market softening, there is widespread expectation the Fed will finally start next month to unwind its long-running tight monetary policy. Attention would be on Powell’s remarks on Friday to the annual symposium of global central bankers at Jackson Hole, Wyoming, where he could give signals about the Fed’s plans for borrowing costs.
