Gold Holds Near Record on Rate-Cut Hopes, Growing Haven Demand

Gold prices have been on a tear this year, surging to new record highs as investors seek safe havens amid geopolitical tensions and uncertainty. The precious metal has been boosted by rate-cut optimism, strong central bank buying, and robust Asian purchases. As the US Federal Reserve implements its first interest rate cut since March 2020, gold prices have continued to climb, supported by lower borrowing costs and safe-haven demand.

The US Federal Reserve cut its key policy rate by 50 basis points on September 1, its first rate cut since March 2020, clipping rates to a target range of 5.25% to 5.5%. This move has provided a tailwind to gold prices, as lower borrowing costs make the metal more attractive to investors. The Fed's decision to ease monetary policy has also raised hopes for further rate cuts, which could continue to support gold prices in the coming months.

Global physically-backed gold ETFs have seen a surge in net inflows, attracting $1.4 billion in September alone, according to the World Gold Council (WGC). This marks the fifth consecutive month of net inflows for gold ETFs, driven primarily by North American investors. The increase in ETF holdings has been accompanied by a rise in net long positions in COMEX futures, indicating a growing interest in gold among investors.

Central banks have also been active buyers of gold, adding 8 tonnes to their reserves in August, according to the WGC. The National Bank of Poland was the leading buyer in the month, followed by the Central Bank of Turkey and the Reserve Bank of India. Meanwhile, the People's Bank of China (PBoC) has slowed its gold purchases, with bullion held by the PBoC unchanged at 72.8 million troy ounces at the end of September. Despite the slowdown in Chinese purchases, central bank demand for gold remains strong, driven by concerns over global economic uncertainty and geopolitical risks.

The escalation of tensions in the Middle East and the ongoing war in Ukraine have also contributed to gold's record-breaking rally this year. Investors have turned to gold as a safe haven, seeking refuge in the metal's stable and reliable store of value. The US presidential election in November is also expected to add to gold's upward momentum, as investors brace for potential market volatility and uncertainty.

Looking ahead, gold prices are expected to average $2,580 in the fourth quarter, with an annual average of $2,388. Gold's upward momentum is likely to continue into 2025, supported by strong central bank demand, robust Asian purchases, and safe-haven demand amid geopolitical tensions and uncertainty.



In conclusion, gold prices have held near record highs on rate-cut hopes and growing haven demand. The precious metal has been boosted by lower borrowing costs, strong central bank buying, and robust Asian purchases. Geopolitical tensions and safe-haven demand have also contributed to gold's record-breaking rally this year. As investors continue to seek safe havens amid uncertainty, gold prices are expected to remain strong in the coming months and years.