Gold Breaks Record, What's Driving Investors into a Buying Frenzy?
Gold prices hit another record high in Asia on Tuesday, reaching $3,749.27 per ounce. This increase occurred despite several Fed officials making cautious statements regarding the direction of monetary policy. Investors remain focused on the interest rate cut cycle that began last week, after the US central bank cut rates by 25 basis points.
Investor interest in gold is growing, evident in inflows into gold-backed exchange-traded funds (ETFs), which increased at the fastest pace in more than three years last Friday. BMO Capital Markets analysts believe these ETF inflows are the main driver of gold's rally, despite a previous correction following comments by Fed Chairman Jerome Powell, who tempered expectations of more aggressive easing.
Silver, like gold, also held steady around $44 per ounce after a three-day rally. The surge in options trading volume in the iShares Silver Trust, reaching 1.2 million last Friday, the highest since April 2024, indicates growing speculative support. Both gold and silver have been the best-performing commodities this year, supported by monetary easing, increased central bank reserves, and geopolitical tensions.
Looking ahead, the market will be closely monitoring US inflation data, including the PCE index, which will be released this Friday. If inflation slows, the likelihood of further interest rate cuts will increase. This could strengthen gold's appeal as a hedge, while silver has the potential to continue its positive trend alongside other precious metals. (ads)
Source: Bloomberg.com
