In today’s trading session, the gold futures market experienced a slight downturn, with the December contract closing marginally lower. Nevertheless, the precious metal found a supportive factor in the recent depreciation of the U.S. dollar. Over the past two trading sessions, the dollar has dropped more than one percentage point, offering a cushion for gold prices.
The dollar’s recent decline has been significant. The dollar index, which opened above 103 last Friday, ended at 102.397 after a 0.62% decrease. Today’s trading saw the index fall below 102 for the first time since early January 2024, marking a 2.11% loss in August alone and a cumulative nearly 4% decrease over the past two months, following a 1.74% decline in July.
This weakening dollar has been a key driver behind gold’s recent record-setting performances. Last Friday, gold reached an all-time high by closing at $2,546.20, surpassing the previous record of $2,521.50 set on July 16. This year has seen gold achieve four new record closing prices, with two of these occurring in the last six weeks.
The underlying factor contributing to both gold’s strength and the dollar’s decline is growing market optimism regarding potential interest rate cuts by the Federal Reserve. While the Fed maintained its rate at 5.25% to 5.5% during the July FOMC meeting, there is a strong market expectation for a rate cut in September. According to the CME‘s FedWatch tool, there is a 100% probability of a rate cut, with a 77.5% chance of a 0.25% reduction and a 22.5% likelihood of a 0.5% cut.
Looking ahead, all eyes are on the upcoming economic symposium in Jackson Hole, Wyoming. This annual event, sponsored by the Federal Reserve Bank of Kansas City since 1978, will take place from August 22-24. Titled “Reassessing the Effectiveness and Transmission of Monetary Policy,” the symposium will gather central bankers, business leaders, policymakers, economists, and government officials to discuss crucial economic issues.
Market participants are particularly eager to hear Federal Reserve Chairman Jerome Powell’s speech on the first full day of the event. His comments are anticipated to provide significant insights into the Fed’s current strategy and future outlook, potentially impacting both gold prices and the strength of the dollar in the coming weeks.
Despite today’s minor decline, the persistent dollar weakness continues to support gold, setting the stage for possible further record-breaking performances in the precious metals market.
Related topic: