Gold hits new record on Fed’s likelihood to ease monetary policy

ISTANBUL

Gold hit a new record of $3,508.9 on Tuesday, led by the rising possibility that the Fed may cut rates this month during its Federal Open Market Committee meeting.

As the global fight against inflation continues, major banks’ monetary policy decisions are under the radar of investors. The Fed’s decision in particular will reveal the direction of the global economic outlook.

Central banks are struggling to find policy space amid US tariffs.

The Fed, under the constant criticism from US President Donald Trump, will be announcing its decision this month. The bank is 88% likely to issue a rate cut this month, according to money market estimates, and cut rates twice in total by the end of the year.

The US dollar index lost over the last five trading days with the growing expectations of a rate cut, while the weakening dollar and the impact of global risks pushed gold to a new high.

At the same time, silver started the week on an increase, rising as high as $40.76 per ounce on Monday — its highest since September 2011. Silver reached $40.86 per ounce on Tuesday.

Platinum has been on the rise in the last three trading days, trading at $1,426 per ounce on Tuesday.

Palladium ended Monday at $1,139 per ounce, at a 2.2% increase, while palladium declined 0.1% to $1,137 per ounce.

- Weak non-farm payrolls may push up precious metals

Rahmi Incekara, assistant professor of economics at Istanbul-based Bahcesehir University, told Anadolu that gold and silver both exceeded their key resistance levels at $3,450 and $40 per ounce, respectively, while silver gained 40% since the beginning of the year.

He noted that the non-farm payrolls to be released on Friday may change the outlook for asset pricing, while a large 50-basis-point rate cut by the Fed may further rally precious metals.

“Silver investors should see that the industrial demand needs to be taken into account — silver faced a supply deficit for the fifth consecutive year due to high demand from the industry, so it’s possible that the silver demand is high on the exchange-traded fund side,” he said.

Zafer Ergezen, a futures and commodity markets specialist, told Anadolu that rate cuts would reflect in precious metals, while the US dollar index is expected to lose amid rate cuts.

Ergezen stated that the rising expectations of a rate cut this month drove up precious metals.

He said that after a federal appeals court in Washington, DC, ruled last week that Trump exceeded his presidential power with the sweeping reciprocal tariffs, the risk premium rose.

“Some turmoil is still expected to continue as Trump is likely to react — I can say that this uncertainty supported gold prices and other precious metals,” he added.

Ergezen noted that silver took the lead in precious metals due to its use in industry, while the court decision on tariffs led to the expectations that a tariff-induced economic slowdown may not come and that economies will remain stronger than expected.

He noted that the gold-silver ratio fell from 106 in April to around 85, revealing a trend where silver is more preferable. “This may continue for a while if an agreement is reached on tariffs — or if the court blocks tariffs — then the economy is expected to rebound more strongly with rate cuts,” he added.