**Gold Prices Surge to Record High as Fed Rate Cut Expectations Grow**
Gold prices soared to an all-time high on Thursday, gaining more than 1% as market sentiment shifted towards an impending interest rate cut by the Federal Reserve. This surge was fueled by fresh data that hinted at a slowing U.S. economy, adding to gold’s appeal as a safe-haven investment.
**Gold Prices Break Records**
Spot gold prices rose 1.6% to $2,551.19 per ounce as of 9:46 AM ET (1346 GMT), while U.S. gold futures climbed 1.4% to $2,578.90. These gains were driven by growing anticipation of a potential rate cut from the Federal Reserve at its upcoming meeting on September 17-18.
**Fed Rate Cut Anticipation: The Key Driver**
Expectations of a rate cut were bolstered after the U.S. Labor Department reported a slight increase in initial claims for state unemployment benefits, which rose by 2,000 to a seasonally adjusted 230,000. Meanwhile, U.S. producer prices edged up slightly more than anticipated in August, primarily due to rising service costs. Despite this, the overall inflation trend continued to show signs of easing.
The CME FedWatch tool indicated that markets are pricing in an 87% likelihood of a 25-basis-point rate cut, with a smaller 13% chance of a 50-bps cut. According to Alex Ebkarian, Chief Operating Officer at Allegiance Gold, "As we head towards a lower interest rate environment, gold is becoming much more attractive as an investment option. We could see more frequent rate cuts rather than large, singular reductions."
**The Appeal of Gold Amid Lower Rates**
Gold, which offers no yield, tends to become more attractive to investors in a low-interest-rate environment. This is because lower interest rates reduce the opportunity cost of holding non-yielding assets like gold. Phillip Streible, Chief Market Strategist at Blue Line Futures, stated, "The labor market is weakening. If it continues to deteriorate, the Fed's rate-cutting journey could extend for a longer period."
**Other Precious Metals Also Rise**
Palladium saw a significant 2.7% jump to $1,035.69 per ounce, its highest price in over two months. This surge followed remarks from Russian President Vladimir Putin, who suggested Moscow may consider limiting the export of key commodities like uranium, titanium, and nickel in response to Western sanctions. Although palladium was not explicitly mentioned, it is a by-product of Russian nickel production, and export restrictions could potentially impact its availability, further tightening the already strained supply in the market.
Nitesh Shah, a commodity strategist at WisdomTree, commented, "Putin didn’t mention palladium directly, but export curbs on nickel could deepen the palladium market deficit."
Meanwhile, silver added 2.3% to reach $29.35 per ounce, and platinum increased 1.8% to $968.48.
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