Gold prices returned to their historical highs on Tuesday, driven by the market’s reaction to Federal Reserve Chair Jerome Powell’s remarks.
Powell noted progress on inflation towards the Fed’s 2% target, raising market optimism for potential monetary policy easing.
Market participants broadly expect interest rate cuts as early as September, with potentially two other cuts by year-end. Today’s retail sales data strengthened confidence in a cut in September as it was muted as expected at 0%.
Comments from Fed governors Christopher Waller and Adriana Kugler later this week may provide further clues and could affect gold’s performance. The asset could continue to find support as monetary policy easing materializes.
Meanwhile, the political developments in the US, especially the increasing prospects of Donald Trump’s success in the upcoming presidential race, could impact the markets. A potential Trump victory could lead to an increase in Treasury yields which could moderate a rally in gold prices. However, near-term uncertainty surrounding the US elections may still benefit gold, and central banks’ ongoing demand may also support the market in the medium term.
