Gold Approaches New Record, Market Holds Breath
Gold prices strengthened on Wednesday, rising again above $4,610 per ounce, attempting to approach a new record high. This movement indicates that buying interest remains strong, even though prices are already in high territory.
The main driver came from expectations of a US interest rate cut. Many market participants are beginning to believe the Fed has room to ease policy, making gold—which does not yield—more attractive.
December inflation data signaled that core price pressures are starting to become more manageable. The market views the inflation trend as moving slowly but consistently in a "cooler" direction, thus reducing fears of another inflationary explosion.
This is evident from the movement in the interest rate futures market: investors are divided between expecting two or three interest rate cuts this year. This figure is more aggressive than the median projection of Fed officials, which tends to be just one cut.
In addition to interest rate factors, demand for safe assets is also strengthening. Concerns about the Fed's independence have risen again following news of a criminal investigation related to Fed Chairman Jerome Powell's testimony in June.
Geopolitical risks are also fueling the situation. The market continues to monitor the situation in Iran, including the possibility of US involvement, after repeated warnings of military action if tensions escalate.
The combination of the "rate cut story" and the safe haven story has given gold renewed momentum to challenge its record high. However, market participants will also be cautious: the closer to a record, the greater the volatility, as profit-taking can occur at any time.
5 Key Points:
- Gold rose above $4,610/oz and is targeting a new record high.
- Expectations of a US interest rate cut are growing stronger.
- Core inflation in December eased, and price pressures are seen gradually easing.
- The market is predicting two to three rate cuts this year, more aggressive than the Fed's projections.
- The Fed's independence issue and tensions with Iran are boosting safe haven demand. (asd)
Source: Newsmaker.id
