Gold prices surged to a new record high during Asian trading on Tuesday, extending their sharp gains from previous sessions. The rally was fueled by growing expectations of a potential interest rate cut by the Federal Reserve next week, alongside a weaker dollar. Demand for gold as a safe haven also strengthened amid escalating political tensions, particularly in France, after the Prime Minister resigned following a no confidence vote in the National Assembly. In Asia, political uncertainty added further support to gold prices, coinciding with heightened geopolitical tensions especially after a new deadly attack reignited talk of additional U.S. sanctions on Russia.
Spot gold climbed 0.6% to a record level above $3,650, while gold futures reached their highest at around $3,695.
This surge followed a series of economic data showing continued weakness in the U.S. labor market, most notably employment figures revealing a sharp slowdown in job creation during August. These developments boosted expectations that the Federal Reserve will cut interest rates at its upcoming meeting, with markets pricing in more than a 90% chance of a 25 basis point reduction and a small chance of a larger cut.
Statements from Federal Reserve officials in recent weeks signaled their readiness to lower rates if labor market weakness persists, though they also voiced caution about high inflation, especially given the ongoing effects of tariffs recently imposed by the U.S. administration. Markets now await the release of U.S. inflation data this month, with expectations that price pressures will remain elevated due to the newly implemented tariffs.
Lower interest rates generally support gold and other precious metals by reducing the opportunity cost of holding non yielding assets compared with government bonds.
Elsewhere in precious metals markets, platinum futures rose 0.6%, while silver held near its highest level in 14 years despite a slight 0.2% decline. Analysts noted that uncertainty over U.S. tariffs on copper imports contributed to supply route shifts from Asia to the U.S. in the first half of the year, with expectations that this trend may reverse in the second half after the temporary postponement of additional tariffs.
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