Pointing to $2700? Gold approaches historical highs again as investors weigh US election and Fed rate movements

According to the Zhitong Finance and Economics APP, as investors shift their focus to the upcoming U.S. election, the price of gold is approaching a historic high. Polls predict that the competition in the U.S. election will be very intense in less than three weeks.

Data shows that spot gold rose by 0.8% to $2682.39 per ounce, close to the historical record of $2685.58 set last month. Gold prices have risen by about 30% so far this year.

All precious metals have also risen, with silver rising by nearly 1.5%. The U.S. dollar spot index remains stable near a two-month high.

Gold is one of the best-performing commodities in 2024, setting consecutive records due to its appeal as a safe-haven asset and significant buying from central banks. Now, as investors in the financial markets realign their portfolios to cope with the uncertainty of the U.S. presidential election results, gold has found new support.

On Tuesday, Republican candidate Trump stated in an interview that he would significantly increase tariffs, cut taxes and regulations, and seek more direct negotiations with the Federal Reserve, leading to a rebound in the U.S. dollar. Meanwhile, market veterans indicate that in the options market, traders are more focused on Fed rate cuts and the health of the U.S. economy.

Analysts led by Mark Haefele, Chief Investment Officer of UBS Global Wealth Management, stated in an email, "We expect uncertainty and volatility to rise until the next U.S. government is finalized." They suggest that in turbulent trading environments, "gold and oil can be effective portfolio hedging tools."

Currently, the prevailing view among Wall Street economists is that Trump's trade policy will ultimately support the U.S. dollar, as import tariffs will prevent the outflow of dollars overseas and may push up inflation and interest rates. A prolonged trade war will also dampen global risk sentiment, further supporting the safe-haven U.S. dollar.

This situation may have a negative impact on gold. In times of inflation and geopolitical turmoil, this asset often performs well, but it may be affected when the dollar strengthens and interest rates rise.

Over the past year, the Fed's rate hikes have hardly slowed down the pace of gold hitting consecutive record highs. Many investors are now betting that a shift to loose monetary policy and the resulting slowdown in U.S. economic growth will help drive further increases.

A survey conducted at a major annual conference in the gold industry indicated that gold prices are expected to climb to record highs in the coming year. Representatives at the London Bullion Market Association event held in Miami expect gold prices to rise to $2917.40 per ounce by the end of October next year, about 10% higher than the current level