Gold Hits All-Time High as Inflation Softens, Fed Rate Cut Anticipation Grows

Gold prices surged to an all-time high of $2,570 during Friday’s Asian session, fueled by weaker-than-expected US Producer Price Index (PPI) data.

The report, showing a cooling inflation environment, has increased expectations for a Federal Reserve rate cut at its upcoming September meeting. This bolstered gold’s appeal, particularly as US Treasury yields dipped to their 2024 lows and the US Dollar weakened.

🚀 Gold skyrockets to a historic all-time high of $2,550! Inflation concerns and rate cut speculation are fueling this epic rally. 📈 #Gold #Inflation #Investing #MarketUpdate #AllTimeHigh pic.twitter.com/ANzMxur2Fz

— Arslan Ali (@forex_arslan) September 12, 2024

The PPI report showed annual headline inflation rising by 1.7%, slightly below expectations of 1.8%, while core PPI (excluding food and energy) rose by 2.4%, below the anticipated 2.5%. These figures contributed to the speculation that the Fed could cut interest rates by as much as 50 basis points.

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— Shirin (@Shirin__FX) September 13, 2024

Additionally, gold demand has been driven by heightened geopolitical tensions in the Middle East and ongoing conflict between Russia and Ukraine. Israel has increased airstrikes on Iranian-linked targets in Syria, while Hamas and Hezbollah launched a massive attack on northern Israel.

These developments, coupled with Russia’s warnings about Ukraine’s missile strikes, have further strengthened gold’s status as a safe-haven asset.

Looking Forward: Fed Watch

As investors await Friday’s Preliminary Michigan US Consumer Sentiment Index, caution remains. However, gold’s upward momentum suggests strong weekly gains. With the CME Group’s FedWatch Tool indicating a 40% chance of a 50 basis-point rate cut, gold is likely to remain attractive.