Gold resets the bar with growing hopes of US rate cut

Gold has risen to a record high, building on a surge of nearly 2 per cent on Thursday, as the US dollar extended declines ahead of a widely expected Federal Reserve rate cut next week.

Bullion climbed as much as 0.5 per cent to $US2570.10 an ounce on Friday, putting it on track for a weekly gain of almost 3 per cent.

The precious metal made a new high in the previous session after the euro rose against the greenback, as investors pared bets that the European Central Bank, which lowered rates on Thursday, would cut again next month.

Gold has surged by around a quarter this year, supported by the Fed’s path to monetary easing. Central-bank buying and strong haven demand due to conflicts in the Middle East and Ukraine have helped the advance. Interest from retail investors is also picking up.

Traders were also weighing two US data points released Thursday that showed an uptick in applications for unemployment benefits, and a slight rise in August’s producer price index, although the categories that feed into the Fed’s preferred inflation gauge were muted.

The PPI data has left “some room for the Fed to consider more aggressive cuts ahead”, said Jun Rong Yeap, a market strategist with IG Asia.

“The push to yet another record high reinforces the broader upward trend in place for the yellow metal.”

Gold’s breakout from its range leaves $US2670 an ounce as “the projected price target,” he said.

Investors closing out bearish wagers on gold may have also contributed to the metal’s ascent. Money managers’ gross short positions in Comex gold futures stood at the highest in four weeks in the week ending September 3, according to the latest data.

“Gold’s being used more as a hedge in the portfolio right now,” said Chris Weston, head of research at Pepperstone Group. He pointed to Thursday’s weak US labour market report as an indication that fund managers may view gold as a place to park money in case the US economy takes a turn for the worse, which would further boost prices.

Spot gold rose 0.4 per cent to $US2567.42 at 11.40am in Singapore. The Bloomberg Dollar Spot Index fell 0.2 per cent, adding to losses in the previous session. Silver and platinum climbed, while palladium edged lower.

Bloomberg