Bullion Breaks Records as Investors Bet Beyond Fed Rate Cuts

Highlights:

• Gold reached a record high of US$3,749.27 an ounce in Asia at the time of writing.
• Investor demand surged, with gold ETFs expanding at the fastest pace in over three years.
• Lower U.S. interest rates boosted bullion’s appeal, despite cautious Federal Reserve signals.

Market Rally

Gold prices climbed to fresh record levels, defying cautious signals from the U.S. Federal Reserve about the pace of future monetary easing. After the Fed reduced interest rates last week, traders pushed bullion higher, showing confidence in the metal’s long-term appeal.

At the time of writing, gold traded at US$3,749.27 an ounce in Asian markets, setting a fresh record high. The gains followed two consecutive sessions of upward momentum, with each setting fresh records.

Investor Demand Strengthens

The rally has been fueled by a surge in investor interest through exchange-traded funds (ETFs). On Friday, gold-backed ETFs recorded their fastest expansion in more than three years, highlighting the strong appetite for the safe-haven asset. This comes after a brief dip last week, when Fed Chair Jerome Powell signaled a cautious approach to rate cuts, tempering expectations for rapid monetary easing. However, the pullback proved short-lived as investors quickly returned to the market.

Why Lower Rates Matter

Precious metals like gold generally benefit when interest rates fall, as they offer no yield compared to interest-bearing assets. With borrowing costs reduced, the opportunity cost of holding gold decreases, making it more attractive to both institutional and retail investors. Analysts note that while Fed officials remain cautious about future policy, the broader market continues to view gold as a hedge against uncertainty, especially amid ongoing concerns about global growth and inflation.

Outlook Ahead

With momentum building, market watchers suggest gold could extend its rally further if central banks continue to maintain accommodative policies. Investors will be closely monitoring upcoming U.S. economic data and Fed commentary to gauge whether the current upward trend in bullion has more room to run.

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