The worth of gold surged to a latest all-time high of $2,582 per troy ounce on Friday on the back of a weaker dollar and expected rate cuts.
The valuable metal is up 3% prior to now three days as investors eye the Federal Reserve’s next Federal Open Market Committee meeting Tuesday and Wednesday, when the U.S. central bank is predicted to cut its benchmark rate of interest by as much as half a percentage point.
Gold historically has an inverse relationship with rates of interest — as rates fall and yield-producing assets lose a few of their luster, the worth of gold tends to rise while offering more appeal to investors searching for assets with higher appreciation potential. Though this is not all the time the case, it appears to be within the lead-up to the Fed’s decision next week.
While it stays unclear if the Fed will cut by 25 or 50 basis points, there is theory that a bigger cut could occur based on strong recent economic data. August’s consumer price index print got here in at 2.5%, which is just above the Fed’s long-run goal of two%.
Between inflation being the bottom in three years, August’s job report being stronger than July’s and wholesale prices, as measured by the producer price index, only increasing by 0.2% last month — in step with analysts’ expectations — the Fed is now equipped with sufficient data to make a large cut to the effective federal funds rate.
The result could possibly be ongoing bullishness for gold, which is already up 35% this 12 months and outperforming the S&P 500 by 17% in 2024. Investors who want to achieve exposure to gold can achieve this by purchasing the physical metal through online dealers or buying shares of gold miner stocks or gold-themed ETFs.
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