Gold prices increase to USD2,111.39

(MENAFN) Gold prices surged to an unprecedented peak of USD2,111.39 during recent trading, fueled by growing speculations that the US Federal Reserve might initiate interest rate cuts early next year. However, the precious metal faced a subsequent decline under the weight of a strengthening dollar. Spot gold witnessed a 0.4 percent drop, settling at USD2,062.80 per ounce, while US gold futures also dipped by 0.4 percent to USD2,082.40.

The surge in gold prices earlier in the Asian session, with a nearly two percent jump to the record level of USD2,111.39, was attributed to renewed expectations of impending interest rate cuts. These expectations were fueled by remarks from Federal Reserve Chairman Jerome Powell on Friday, where he indicated that there was no current contemplation of interest rate reductions.

The subsequent decline in gold prices was influenced by a 0.3 percent increase in the dollar index, rendering the yellow metal more expensive for holders of other currencies. Tim Waterer, Chief Market Analyst at KK, noted the prevailing sentiment among traders, stating, "After Powell’s speech, traders have become more convinced that we are at the peak of US interest rates, and thus the next path is likely to be downward rather than upward."

Chairman Powell's emphasis on the absence of current considerations for interest rate cuts contributed to the market's interpretation that a peak in US interest rates had been reached. Lower interest rates are perceived to reduce the opportunity cost of holding gold, making it a more attractive investment in a low-interest-rate environment. The trajectory of interest rates will likely remain a key determinant of gold prices, with market participants closely monitoring upcoming economic data, including Friday's US non-farm payrolls report, for further insights into interest rate expectations.


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