Gold prices reach record high amid weak dollar

Gold prices reached new record highs on Friday, driven by a weaker U.S. dollar, growing expectations of further interest rate cuts by the Federal Reserve, and escalating geopolitical tensions in the Middle East. The surge in gold prices comes despite relatively muted physical demand in Asian markets, highlighting the metal’s role as a global haven during economic uncertainty and geopolitical unrest.

Spot gold rose 1.0% to $2,613.09 per ounce by late morning, peaking at an all-time high of $2,614.49. U.S. gold futures also experienced an uptick, rising 0.9% to $2,638.30. So far this year, gold has gained 27%, positioning it for its most significant annual rise since 2010. The latest boost to gold’s value was fueled by the commencement of the Federal Reserve’s interest rate-cutting cycle, which has encouraged investors to seek refuge in the non-yielding metal.

With the Federal Reserve joining other central banks in reducing rates, the U.S. dollar has weakened further, providing additional support to gold prices. The expectation of continued dollar depreciation suggests that gold could maintain its upward momentum as investors increasingly hedge against a slowing global economy and ongoing geopolitical risks. Market analysts speculate that gold could reach $3,000 per ounce within a year under these conditions.

Despite gold’s recent surge, technical indicators such as the Relative Strength Index (RSI) suggest that the metal has entered overbought territory. This indicates strong buying momentum but also signals potential caution for traders. The RSI level reached 70.4 on Friday, indicating that the asset might be due to a correction. However, the trend remains bullish, as gold benefits from its inverse relationship with the U.S. dollar and treasury yields.

In contrast to the booming prices, demand for physical gold in Asian markets remains subdued. Notably, China, one of the world’s largest consumers of gold, did not import any gold from Switzerland in August, marking the first time in over three years that such a gap in trade has occurred. This highlights a disconnect between global market dynamics and regional physical demand, which has influenced domestic economic challenges and fluctuating consumer behavior.

Other precious metals also saw mixed movements. Silver gained 1.8% to $31.32 per ounce, buoyed by gold’s rally and ongoing industrial demand. Platinum remained steady at $989.21, while palladium edged slightly to $1,078.58, reflecting varied demand factors across the metals market.

Gold’s recent performance underscores its enduring appeal as a safe-haven asset amid economic and geopolitical uncertainties. With multiple factors converging to drive prices higher, the precious metal appears set to maintain its status as a key asset in investment portfolios worldwide, offering protection against inflation, currency devaluation, and geopolitical risks.

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