Gold continues to defy expectations as its price remains close to record levels, a situation that intrigues investors around the world. On Tuesday, spot gold stabilized at $2,581.68 per ounce, an impressive figure just hours before the start of the US interest rate reduction cycle. The precious metal had already reached an all-time high of $2,589.59 on Monday, sending markets into a tizzy.
Also read: How can we explain the rise in the price of gold?
A market waiting for the Fed
U.S. gold futures also showed no signs of movement, holding steady at $2,608.60. The sluggishness reflects investors’ caution over the Federal Reserve U.S. policymakers, whose two-day meeting ends on Wednesday, are concerned about the Fed’s direction of monetary policy, with 66% of markets predicting a 50 basis point cut, up sharply from 43% the previous week.
Gold under pressure: towards a correction?
Although gold has historically been a safe haven in times of uncertainty, some analysts warn of a possible correction. Even a significant interest rate cut could cause temporary weakness in gold. Indeed, since the market has already anticipated this decision, investors could take advantage of it to reduce their long positions.
According to a market strategist, the recent pause in the surge in gold price is mainly due to this uncertainty. Caution reigns, as investors wait for more clarity from policymakers before taking new positions on the precious metal.
Impact of the dollar and US retail sales
The dollar, down 0.1%, helped make gold more attractive to holders of other currencies, adding to price stability. But the Fed’s final decision isn’t the only data investors are watching. The results of the retail sales US data for August, expected this Tuesday at 12:30 GMT, could also influence market dynamics.
Other precious metals benefit from the calm
Along with gold, other precious metals continued to move slightly higher. Spot silver rose 0.1% to $30.79 an ounce, while platinum gained 0.6% to $986.90. palladiummeanwhile, climbed nearly 1%, reaching $1,087.09, a record high since last April.
Despite this moderate volatility, the relative calm in the markets could be only temporary. Goldman Sachs, for example, has reiterated its optimistic view on the evolution of gold prices. The bank notes that the ETF Backed by physical gold, prices continue to rise gradually, a positive sign as investors prepare for a continued cut in the Fed’s key interest rate.
As Chinese markets are closed for the mid-autumn festivalthe world’s eyes remain on the Fed. An aggressive rate cut could upend current expectations and make gold an even more sought-after investment in the weeks ahead.
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