The trajectory of gold prices remains bullish, spurred by forecasts of a rate cut this September. Such predictions come as the Federal Reserve shows a dovish inclination, and central bank purchases surge globally. Moreover, the market’s unpredictability combined with growing geopolitical tension adds to this perception.
The ongoing economic crisis due to COVID-19 further fuels this bullish trend. Consequently, investors worldwide are warming up to gold as a potentially lucrative investment. Besides, experts imply that new breakthroughs in gold mining technology may soon stabilize the supply chain.
Last week, gold recorded its third straight week of gains, registering an impressive +0.81% increase. The persistent rise in gold prices coupled with a steady inflation increase and increasing economic uncertainty make gold an asset of choice for many investors.
Gold’s bullish trajectory amid rate cut forecasts
Despite the occasional pullbacks, gold seems to have a solid position above the $2,400 mark.
The decreasing U.S. consumer price index, according to some experts, signals the end of the Federal Reserve’s strict monetary tightening phase. Federal Reserve officials such as San Francisco Fed President Mary Daly and Chicago Fed President Austan Goolsbee support this theory, recognizing future rate reductions’ likelihood.
Lower interest rates could stimulate investment in the commercial sector, possibly leading the U.S. economy into a new monetary easing phase. Simultaneously, recent data reveal softened price pressures and domestic labor conditions. Consequently, the possibility of a September rate hike shot up to an impressive 96%, creating a favorable environment for gold.
However, the inflation scenario becomes complicated with the June’s Producer Price Index showing a slight increase. This unexpected surge suggests an unclear inflation outlook, underlining increased uncertainty in predicting future inflation trends and presenting a significant challenge for policymakers.
Despite these complexities, global disputes, international trade conflicts, worldwide growth patterns, and global central banks’ consistent gold purchases enhance gold’s appeal as a reliable form of an asset. Thus, suggesting a promising outlook for gold despite global economic uncertainties.
