Gold prices surged to a new high this week, fueled by a combination of economic factors and global tensions.
Record Highs
On Friday, gold prices surged to an unprecedented level of $2,487.66 per ounce. This significant milestone contributed to a weekly gain of 2.5%. U.S. gold futures mirrored this upward trend, rising 1.4% to $2,526.40.
Impact on Dollar and Interest Rates
The continued weakness of the U.S. dollar played a crucial role in driving gold prices up. The dollar index fell 0.3% and is heading for its fourth consecutive week of losses. Expectations of U.S. interest rate cuts have also bolstered gold's allure. Recent data from the Producer Price Index (PPI) and Consumer Price Index (CPI) indicate subsiding inflation, leading traders to anticipate a potential 25-basis point rate cut in September. Lower interest rates typically enhance gold's appeal by reducing the opportunity cost of holding non-yielding bullion.
Geopolitical Tensions
Escalating geopolitical tensions, particularly in the Middle East, have further fueled demand for gold. The Israeli army's order for fresh evacuations in southern and central Gaza, areas previously designated as humanitarian safe zones, has heightened global uncertainties. As a traditional hedge against geopolitical risks, gold has seen increased interest from investors.
The surge in gold prices highlights its enduring appeal as a primary safe-haven asset amid economic uncertainty and global tensions.
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