Gold soars to record highs, driven by a weak dollar
What’s happening:-
Gold prices surged to more than two-weeks high on Tuesday, driven by safe-haven demand.
What happened:-
US President Donald Trump removed Federal Reserve governor Lisa Cook, which sparked concerns around the independence of the central bank and uncertainties around what the government may do next.
Weakness in the US dollar also provided a boost to gold prices.
Why it matters:-
The ousting of the Fed governor signals a sharp escalation of Trump’s battle against the central bank. The US President has been pushing the Fed to cut interest rates to stimulate the economy, while the central bank has expressed concern around inflation triggered by the government’s latest tariff policy.
The latest move fuelled concerns around the Fed’s independence and ability to conduct monetary policy without government interference.
Gold hits two-week high
Last week, Federal Reserve Chairman Jerome Powell indicated an interest rate cut at the central bank’s upcoming meeting in September. The appeal for non-yielding gold generally rises in a low-rate environment and during times of economic uncertainty.
Meanwhile, data released on Tuesday showed that US durable goods orders contracted by 2.8% to $302.8 billion in July, following a 9.4% decline in the previous month. The decline was better than market expectations of 4%.
Weakness in the US dollar lent support to the yellow metal on Tuesday, as a softer greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.2% to 98.23.
Gold today
US gold prices for December delivery rose 0.5% to settled at $3,433 an ounce on Tuesday. The safe-haven metal extended gains this morning, rising by around 0.1%.
In other metals trading, silver prices settled at $38.606 an ounce, copper prices fell to $4.5330, platinum closed at $1,349.4 and palladium closed at $1,094.40.
What to watch:-
Investors now await the release of data on GDP growth rate on Thursday and core PCE price index on Friday. The core PCE price index in the US, which rose by 2.8% year-over-year in June, is expected to surge by 2.9% in July. Analysts expect the US economy to expand by an annualised 3.1% in the second quarter, following a 0.5% decline in the previous quarter.
Investors will also continue monitoring tariff-related announcements from the Trump administration.
Gold prices
Gold prices have risen more than 27 percent since the beginning of the year, driven by prevailing economic uncertainty and growing concerns about rising global inflation. Amid escalating trade tensions and growing concerns about economic growth, investors are strengthening their positions in gold in search of stability and safety for their assets.