Gold futures edged closer to a significant milestone on Thursday, 12th of September, 2024, as the price came within $15 of reaching $2,600 per ounce, underscoring the continuing rally of the precious metal in the market. Silver also joined the upward trend, marking a significant rise alongside gold. Gold settled at $2,587.30 per ounce, hitting its peak for the day, and remained near this level during early trading in Asia on Friday. This represented a 1.9% increase compared to the previous day’s closing price.
Silver prices also saw notable movement, with futures increasing by 4.5% to $30.23 per ounce. The upward trend was not limited to precious metals, as copper futures on the Comex exchange rose by 1.7%, closing at $4.21 per pound.
The surge in precious metal prices coincided with a slight firming of the US dollar, which settled around 67.24 US cents. This was accompanied by a marginal rise in US bond yields following the release of the Producer Price Index (PPI) data, which showed a modest monthly gain of 0.2%, up from the previous month’s 0.1%. The annual PPI rate also increased, increasing to 2.4% from 2.3%, signaling slightly higher inflationary pressures. The PPI report followed Wednesday’s Consumer Price Index (CPI) data, which had met market expectations and reinforced predictions that inflation may stabilize.
Meanwhile, the European Central Bank (ECB) made headlines in the global economic landscape by reducing its main interest rate by 0.25% to 3.5%, a widely anticipated move that reflected sluggish economic growth and cooling inflation across the Eurozone. The ECB had already cut rates earlier in the year, and this latest reduction was aimed at spurring economic activity. The central bank also lowered its growth forecast 2024, revising it to 0.8%, citing weaker domestic demand as a contributing factor.
For many in the market, the ECB’s interest rate cut raised questions about the path forward. While the central bank did not commit to a specific course of action, it emphasized a data-driven approach, meaning future decisions would hinge on economic developments. Speculation remains over whether the ECB will pause in its next meeting in October or pursue another rate cut by December.
This move by the ECB comes when market participants eagerly anticipate the Federal Reserve’s next steps. The Federal Reserve is expected to follow suit with its interest rate cuts in the coming weeks, fueling optimism that borrowing costs will fall further. This sentiment, combined with the actions of central banks such as the ECB, has driven increased demand for safe-haven assets like gold and silver, bolstering their prices amid continued global economic uncertainty.
As the Fed’s next meeting approaches, market watchers will closely follow developments to gauge the impact on the precious metals market, particularly gold, which continues to demonstrate its strength as a reliable store of value in turbulent economic conditions. With further rate cuts anticipated, the outlook for gold and silver remains positive, driven by central bank policies and investor sentiment toward safe-haven assets.
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