Gold Breaks $US3,900 Mark Amid Fed Rate Cut Expectations and Yen Weakness

Highlights:

• Gold surpasses $US3,900/oz: Prices hit a record high as investors seek safe-haven assets amid yen weakness and the US government shutdown.
• Rate cut expectations fuel rally: Anticipation of further US Federal Reserve rate cuts boosted demand for the non-yielding metal.
• Spot gold climbs at the time of writing: Prices rose 1.1% to $US3,929.91/oz, while US gold futures for December delivery advanced 1.2% to $US3,954.70.

Gold prices surged past the $US3,900-an-ounce milestone for the first time on Monday, supported by strong haven demand. The rally was driven by a combination of factors including the sharp depreciation of the Japanese yen, political uncertainty stemming from the US government shutdown, and growing expectations of additional interest rate cuts by the US Federal Reserve. At the time of writing, spot gold was up 1.1% at $US3,929.91 per ounce by 2:08 am GMT (1:08 pm AEDT), while US gold futures for December delivery climbed 1.2% to $US3,954.70.

Investor Flight to Safe-Haven Assets

The fall in the yen has amplified demand for gold, traditionally regarded as a safe-haven asset during periods of currency volatility. The ongoing political uncertainty in Washington, particularly the US government shutdown, has further unsettled investors, prompting them to move away from riskier assets.

Impact of Expected Federal Reserve Rate Cuts

Investor sentiment is also being shaped by expectations that the US Federal Reserve could introduce additional rate cuts sooner than anticipated. When interest rates drop, the appeal of holding assets like gold— which do not generate interest— often rises, driving stronger demand. “Anticipation of rate cuts alongside rising geopolitical and economic concerns has strengthened gold’s appeal as a store of value,” analysts noted.

Outlook for Gold

With macroeconomic and political pressures showing few signs of easing, analysts believe gold could maintain its upward momentum. Investors are likely to continue favoring the precious metal as a hedge against uncertainty, especially if the Federal Reserve follows through with further monetary easing.

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