Gold prices higher, remain near record highs on rate cut bets

Investing.com-- Gold prices rose Tuesday, building on sharp gains in past sessions on growing bets on a Federal Reserve interest rate cut next week, and a weaker dollar. 

At 05:05 ET (09:05 GMT), spot gold traded 0.3% higher to $3,648.40 an ounce and gold futures for December climbed 0.3% to $3,688.12/oz, having earlier hit new record highs. 

Fed easing bets boost gold prices 

Bullion prices rose sharply since last week after several data points highlighted a sustained cooling in the U.S. labor market. Most notable of these was last week’s  nonfarm payrolls release, which showed the U.S. barely created any new jobs in August. 

The prints drummed up hopes that the Fed will cut interest rates in September, with markets seen pricing in a 92.4% chance for a 25 basis point reduction during the Fed’s Sept 16-17 meeting. Markets were also pricing in a 7.6% chance for a bigger, 50 bps cut, CME Fedwatch showed. 

Several Fed officials signaled in recent weeks that the central bank will be open to rate cuts amid more signs of cooling in the labor market. But they also flagged caution over sticky inflation, especially in the face of price increases stemming from U.S. President Donald Trump’s trade tariffs.

U.S. inflation data for August is due this week, with markets watching for any more upside in inflation, given that a bulk of Trump’s tariffs took effect last month.

"Prices have been rising for three consecutive sessions, supported by increased bets on a wave of Federal Reserve rate cuts this year," said analysts at ING, in a note. "Continued concerns over the Fed’s independence will also remain the focus for the gold market looking ahead. Gold prices have increased nearly 40% this year amid Trump’s aggressive trade policy, conflicts in the Middle East and Ukraine, and central bank buying."

Safe-haven flows into gold also increased in the face of a fresh political crisis in France, where Prime Minister Francois Bayrou resigned after losing a vote of confidence in the National Assembly.

Political uncertainty in Japan after PM Shigeru Ishiba’s resignation, and prospects of more U.S. sanctions against Russia following a deadly weekend strike by Moscow against Ukraine, also contributed to bullion’s safe-haven demand.

Lower rates tend to benefit gold and metals, given that they lower the opportunity cost of investing in non-yielding assets over government bonds.

Silver slips from 14-yr high

Other precious metals also gained on Tuesday, with Platinum Futures trading 0.8% higher at $1,396.35/oz. 

Silver Futures slipped 0.1% to $41.866 an ounce, falling below last week’s highest level not seen since August 2011.

Benchmark Copper Futures on the London Metal Exchange inched 0.1% lower to $9,919.25 a ton, while U.S. Copper Futures also gained 0.1% to $4.5633 a pound.

"Uncertainty over US tariffs on copper imports shifted supply from China to the US in the first half of the year. This trend may reverse in the second half, as Trump has delayed plans for a 50% tariff on refined copper for now," ING analysts said in a note.

Ayushman Ojha and Ambar Warrick contributed to this report