2023.12.01 19:09
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Gold spot prices surged more than 1.8% during the trading session! It is only 6 cents away from reaching a new all-time high.

The spot price of gold surged by more than 1.8% under the expectation of a rate cut by the Federal Reserve, approaching its historical high, only 6 cents away. The weak ISM manufacturing PMI data in the United States and bond traders' bets on a rate cut by the Federal Reserve next year have intensified the upward momentum of gold prices. Institutions such as UBS predict that with the rate cut by the Federal Reserve and the decline in real interest rates, the price of gold may reach new highs again. At the same time, the prospects of US interest rates and geopolitical uncertainties are also supporting the rise in gold prices.

On Friday, spot gold surged more than 1.8% to $2075.41 per ounce, approaching the historical high of $2075.47 per ounce set on August 7, 2020, with only a 6 cent difference.

Despite Federal Reserve Chairman Powell's reiterated statement that it is still too early to speculate on policy easing, bond traders increased their bets on Fed rate cuts next year, as weak US ISM manufacturing PMI data pushed the two-year US Treasury yield down 11 basis points to 0.457%, the lowest since June. The US November ISM manufacturing index was 46.7, marking the 13th consecutive month of contraction, the longest contraction period in 20 years. Among them, the new orders index has contracted for 15 consecutive months, the longest continuous contraction since 1981-1982.

The "New Fed Communication Agency," seen as the "mouthpiece of the Fed," wrote that the Fed's rate hikes may have already ended, but officials are still "stubborn," and don't expect them to admit in black and white that the rate hike cycle has ended.

Since early October, boosted by expectations of the end of the Fed's rate hike cycle and a weak US dollar, gold prices have continued to hit new monthly highs. The main reasons are as follows:

  • The outlook for US interest rates is the main driver of gold prices, and lower rates are usually favorable for gold as it does not generate any interest.
  • Although the risk of Middle East conflicts seems to have been contained, uncertainty continues to support gold prices.
  • Central bank gold purchases may remain strong.

Wall Street institutions such as UBS expect that with the combination of Fed rate cuts and a significant drop in real interest rates, gold prices may reach new highs. According to UBS statistics, in the approximately three months after the end of previous rate hike cycles, gold prices tend to fall by 2%, but then rise by 7% in the following six months.