Gold prices are climbing as investors eye a potential interest rate cut following last week’s promising inflation reading. Indeed, gold futures are up 1.7% today, trending around a new all-time high.
As Wall Street is growing increasingly confident that the Federal Reserve will cut rates in September, bullion has regained its shine.
Last week’s consumer price index report (CPI) has fueled the disinflationary narrative lately, for good reason. Prices, as measured by the CPI, actually fell 0.1% in June, reflecting an annual inflation rate of 3%, well below projections on both counts.
With the Fed already expected to cut rates in September, the better-than-expected CPI is viewed as a green light for the central bank’s monetary easing process. According to the CME FedWatch Tool, markets are currently pricing in a roughly 90% chance of a rate cut in September.
Gold Prices Surge With Fed Rate Cuts on the Horizon
Gold is the unwitting beneficiary of the inflation data, as gold prices and interest rates tend to operate inversely, albeit not always on a 1-to-1 basis.
“The path for both gold and silver prices is going to continue to be sideways to higher and I would not be surprised to see a new record high here in the coming weeks or even sooner,” said Jim Wyckoff, senior market analyst at Kitco Metals.
Silver prices are also rising today, up 1.89% at the time of writing. Silver has enjoyed an even stronger year than gold and is up 31% year-to-date.
Still, not everyone’s convinced that metal prices will continue to climb. Gold and silver tend to move quite slowly. As such, some analysts believe today’s jump may precede some stagnation in price.
“Risks are just kind of balanced on each side and I think that (gold is) going to probably trend sideways for that reason,” said Everett Millman, chief market analyst with Gainesville Coins.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
