Gold prices remain relatively volatile this week, but a weaker US dollar is helping to keep gold above the historic $2,500 per ounce level.
The dollar saw further weakness last Friday when Federal Reserve Chairman Jerome Powell confirmed that the ‘time has come’ for interest rates in the US to be cut. Based on the CME FedWatch tool, markets still give a 100% chance for a cut at September’s meeting, with a 34.5% chance of a larger 50 basis point cut.
The news saw the US dollar index fall to it’s lowest since July 2023 on Tuesday, but there has been a slight recovery at the time of writing. After setting a new spot price record of $2,532.39 per ounce last week, gold climbed as high as $2,529.68 as markets opened today before the dollar’s recovery saw prices pull back to around $2,510.
With the dollar still weak, other currencies have seen lessened gains as a result. The pound hit a high of $1.32632 yesterday, it’s highest since March 2022. This has kept gold hovering around £1,900 per ounce this week, and around £50 off the UK record. The Euro also hit a yearly-high of $1.12095 this week, peaking at €2,261.99 per ounce as markets opened, just shy of the Euro record of €2,287.27 in April.
The dollar weakness also saw silver retake $30 per ounce, but the dollar’s recovery this morning has seen the metal pull back below this level once more. With the gold-silver ratio at 85, silver continues to look undervalued while gold sits at all-time highs.
Both metals are now waiting for a further spark to spur some additional buying momentum. Events in the Middle East remain unclear, with Israel launching further military operations in Gaza, and trading missile strikes with Hezbollah in Lebanon, but so far full-scale escalation with Iran has not happened. Events in Ukraine and Russia also remain uncertain following Ukraine’s incursion into Russia.
Fiscal news will also be a key player in the weeks leading up to the Fed’s meeting in September. While a cut seems almost certain at this point, markets have likely only priced-in a small 25 point cut. If inflation, GDP, or job figures point towards a potential larger cut, then this could prompt some further weakness in the dollar, and more gains for gold and silver.
