Gold prices (XAU/USD) found some buyers during early Asian trading on Thursday, hovering around $4,210. The precious metal has surged to near-record levels, driven by expectations of lower U.S. interest rates and ongoing trade tensions that have heightened demand for safe-haven investments. Later today, traders will look for insights from Fed officials, including Michael Barr, Stephen Milan, Christopher Waller, and Michelle Bowman, who are set to speak.
On Tuesday, Federal Reserve Chairman Jerome Powell noted a significant slowdown in employment, which he indicated poses more risks to the U.S. economy. He suggested that it’s likely the central bank will cut interest rates two more times this year. Such anticipated rate cuts could provide support for gold. Lower rates diminish the opportunity cost of gold, which tends to favor less lucrative precious metals.
Currently, the markets are factoring in a 25 basis point (bps) cut at the Fed’s October meeting, followed by another 25 bps cut in December, and potentially three more cuts next year, according to LSEG data.
The escalating trade tensions between the U.S. and China could also drive up gold prices. Both countries plan to impose additional port fees on ships carrying goods between them, increasing trade costs and potentially disrupting cargo flows. The U.S. is set to start collecting these tolls on October 14th.
“Given the recent rekindling of U.S.-China trade tensions, investors may feel an increased need to hedge their long-term investments in equities by diversifying into gold,” said Fawad Razaqzada, an analyst at City Index and FOREX.com, in an interview with Reuters.
Traders are on the lookout for Fed officials’ comments later today, as any unexpectedly hawkish remarks might bolster the dollar (USD) in the short term, potentially negatively impacting dollar-denominated commodity prices.
