Traders have fully priced in a Fed easing for next month, with a 57% possibility of a 25-bp cut and an almost 43% possibility of a bigger 50-bp cut, compared with 65.5% and 34.5% last week
Gold gained on Thursday fuelled by expectations of a deeper U.S. Fed rate-cutting cycle, which is widely expected to start this month.
Spot gold was 0.9% higher at $2,516.18 per ounce by 0926 GMT. The bullion reached a record high of $2,531.60 on August 20.
Gold is supported by a global economic slowdown “that has raised the downside risk across growth-dependent commodities” and also “lifted the prospect for a more aggressive rate-cutting cycle,” according to Ole Hansen, head of commodity strategy at Saxo Bank.
Data released on Wednesday showed that U.S. job openings dropped to a 3-1/2-year low in July, indicating the labour market was losing steam.
Traders have fully priced in a Fed easing for next month, with a 57% possibility of a 25-bp cut and an almost 43% possibility of a bigger 50-bp  cut, compared with 65.5% and 34.5% last week, respectively, shows the CME FedWatch tool.
The widely expected cut has prompted physically backed gold ETFs to resume purchases in recent months. This comes after years of outflows when Western safe-haven seekers chose the U.S. Treasury bond market, where yields were high instead of non-yielding gold.
Now the big question is of course how low the rates are going to go, or how low the yields will go, according to Carsten Menke, an analyst at Julius Baer.
If the Fed cuts the rates, the interest rates will still remain in the restrictive territory – above the neutral rate, and based on that, we do not think that this is going to cause a big wave of buying by Western gold investors, Menke added.
Julius Baer keeps its three- and twelve-month price targets for gold unchanged at $2,500 and $2,600 per ounce, respectively.
