Gold Prices Hit All-Time High on Rate Cut Expectations, Dollar Weakness

On Tuesday, gold prices surged to an all-time high, driven by a weakening U.S. dollar and heightened market expectations for a rate cut by the Federal Reserve. The market widely anticipates that the Federal Reserve will reduce interest rates by 25 basis points during its upcoming policy meeting.

Spot gold prices rose by 0.6%, reaching $3,701.93 per ounce, with intraday highs touching $3,699.37 per ounce. The December-delivery U.S. gold futures contract also saw an increase of 0.5%, settling at $3,735.60 per ounce.

The U.S. dollar weakened against other currencies, reaching its lowest level in over two months. This depreciation of the dollar makes it cheaper for holders of other currencies to purchase gold, contributing to the metal's price surge.

Analysts attribute the rise in gold prices primarily to expectations of significant rate cuts by the Federal Reserve. The uncertainty surrounding global economic growth and geopolitical risks continues to drive demand for safe-haven assets, but the anticipation of lower interest rates is the main catalyst for gold's recent gains.

Market participants are closely watching the Federal Reserve's dot plot, which could indicate two rate cuts by 2025. Such a scenario could further boost gold prices, potentially pushing them above $3,700 per ounce and even reaching $3,800 per ounce.

According to the CME FedWatch Tool, traders are almost certain that the Federal Reserve will cut rates by 25 basis points during its two-day meeting ending on September 17, with a small possibility of a 50 basis point cut.

In related news, the U.S. President has called for more aggressive rate cuts, while the U.S. Senate narrowly confirmed a new member to the Federal Reserve Board of Governors.

Gold prices have surged by approximately 41% this year, driven by central banks' continued purchases, investors diversifying away from the dollar, and strong safe-haven demand due to geopolitical tensions and trade frictions. This upward trend has led to multiple record highs for the precious metal.