Gold near record high on U.S. rate cut prospects

Bullion has soared 37% so far this year after a 27% gain in 2024, driven by the dollar’s weakness, central bank buying, a softening monetary policy backdrop, and wider geopolitical and economic uncertainty

Gold held firm near an all-time high on Monday, inching closer to a key $3,600 level, bolstered by growing expectations of a U.S. central bank rate cut this month following a weaker-than-expected jobs report last week.

Spot gold was flat at $3,586.81 per ounce, as of 0121 GMT. Bullion rose to a record high of $3,599.89 on Friday.

The main driver is U.S. jobs data and the expectations now that the Fed could cut by 50 basis points in September. It’s a marginal chance but a material shift from before the jobs figures, Capital.com financial market analyst Kyle Rodda said.

Basically, all of the tailwinds are blowing for gold at the moment and notwithstanding an inflation shock this week, we will make a good test of $3,600, Rodda added.

U.S. job growth weakened sharply in August, and the unemployment rate increased to a nearly four-year high of 4.3%, confirming that labor market conditions were softening and cementing the case for a central bank rate cut next week.

Traders have fully priced in a 25-bp cut this month, with an 8% chance of a 50-bp rate cut, according to the CME FedWatch tool.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

Focus now shifts to the U.S. inflation report on Thursday that could offer more clarity on the size of the bank’s expected rate cut.

Bullion has soared 37% so far this year after a 27% gain in 2024, driven by the dollar’s weakness, central bank buying, a softening monetary policy backdrop, and wider geopolitical and economic uncertainty.

China’s central bank added gold to its reserves in August, extending purchases of bullion into a 10th consecutive month.