Gold Prices Near Historical Record
At the start of this week, spot gold prices surged significantly, reaching as high as $3,489.78 per ounce, just shy of the historic high of $3,500. It ultimately closed at $3,476.08 per ounce, marking a new high in over four months. Similarly, silver showed strong performance, peaking at $40.73 per ounce and closing at $40.68 per ounce, reaching its highest level since 2011.
The market broadly attributes this rally to the strong bets by investors on an impending Federal Reserve rate cut.
Fed Policy's Direction Becomes a Key Driver
The market is heavily betting on a significant policy adjustment by the Federal Reserve at the September policy meeting. According to the CME FedWatch tool, there is nearly a 90% probability of a 25-basis-point rate cut this month. San Francisco Fed President Daly has previously highlighted the risks of economic slowdown, providing a rationale for further policy easing.
Some institutions even predict that if this week's employment data again shows weakness, the Fed might opt for a more aggressive rate cut. This possibility has increased gold’s prominence in investors’ portfolios.
Weak Dollar Supports Gold
The U.S. dollar index remained under pressure, dropping 2.2% last week and hitting a five-week low on Monday. The weakened dollar not only diminishes its safe-haven status but also enhances the demand for dollar-priced gold and other precious metals. Analysts suggest that the U.S. court's dismissal of some tariffs, combined with concerns over the Fed's independence, made the dollar's outlook more uncertain, accelerating the flow of funds into the gold market.
Silver's Rising Momentum is More Diverse
Unlike gold, silver's rise is also driven by industrial demand. The rapid expansion of the new energy and electronics industries has boosted silver demand, further elevating prices amid tight market supply. Analysts note that silver possesses both safe-haven and industrial attributes, making its movement more explosive under the combined influence of rate cut expectations and industry trends.
Global Political Risks Heighten Safe-Haven Demand
Beyond U.S. economic factors, global political situations have also intensified safe-haven sentiment. Political instability in major European countries, pressure on the French government facing a trust vote, and the rising support for far-right forces in the UK and Germany have heightened market concerns about future stability. Meanwhile, U.S. President Trump’s recent dismissal of Fed governors has reignited questions about central bank independence.
This series of political uncertainties has made gold and silver once again sought after as "safe harbors" for capital.
Non-Farm Employment Report in Focus
Investors will focus on the U.S. non-farm employment data this week, which may become a crucial reference for the Fed's decisions. If the data shows a significant slowdown in the job market, the expectation of a rate cut will be further strengthened, possibly driving gold prices past the $3,500 mark. Conversely, if employment data is strong, it may briefly cool the market, but the long-term easing trend is hard to reverse.
Analysts generally caution that while gold and silver prices still have upside potential, short-term volatility may increase. Investors should carefully strategize and avoid chasing high prices.
