The gold rose above the $3,900 an ounce mark on Monday, the first time in its history, due to safe-haven demand after falling in the yen as well as the US government shutdown, and swirling anticipations of further Federal Reserve rate cuts also contributed to its cause.
In the spot gold, the price was at 0208 GMT and was 0.9 percent higher at $3,922.28 per ounce, having reached an all-time high of $3,924.39 earlier in the day. US gold futures to be delivered in December, which rose 1 percent to $3,947.30.
KCM Trade Chief Market Analyst Tim Waterer said, “Yen weakness on the back of the Japanese LDP elections has left investors with one less safe-haven asset to go to, and gold was able to capitalise.”
He further added, “The enduring US government shutdown means that a cloud of uncertainty still hangs over the US economy and the potential size of any GDP impact.”
Waterer stated that under such conditions, gold would be an asset of choice by investors, especially since the Fed is likely to lower the rates in the current month.
Japanese yen plummeted against the US dollar by the most in five months following the election of fiscal dove Sanae Takaichi to head the ruling party and become the new prime minister.
White House Senior Official quoted on Sunday that the Trump administration will commence mass layoffs of federal employees if the US President Donald Trump decides that talks with congressional democrats to conclude a partial government shutdown are “absolutely going nowhere.”
Fed Governor Stephen Miran once again demanded an aggressive path of rate cuts on Friday, which he attributed to the effects of the economic policies of the Trump administration.
Gold has already gained 49 percent this year following its 27 percent gain last year, aided by the robust central bank purchases, rising popularity of gold-linked exchange-traded funds, a weaker U.S. dollar, and a surge in interest among retail investors in buying gold as a hedge amid escalating trade and geopolitical friction.
This rally gained new strength last month when the Fed reduced the interest rates by one-quarter percent and mentioned that it would gradually reduce the levels of borrowing expenses in the remainder of the year.
The CME FedWatch tool shows that investors are expected to expect further 25-basis-point cuts in October and December with probabilities of 95 percent and 83 percent, effectively.
Non-yielding gold is quite content in a low-interest-rate environment and also in times of economic uncertainty.
Spot gold struck the first time to reach more than $3,000 per ounce in March and $3,700 in mid-September. The rally has attracted a lot of bullishness from many brokerages.
Therefore, spot silver increased 0.8 percent to touch $48.33 per ounce, platinum gained 1.1 percent to reach $1,621.90, whilst palladium added 0.8 percent to reach $1,270.25.
