US gold futures also saw a modest increase, rising 0.2% to $2,554.90, according to news agency Reuters.
Gold has surged nearly $470 or 22% this year, driven by geopolitical tensions, uncertainties surrounding the upcoming US Presidential elections, and expectations of potential rate cuts by the Federal Reserve.
“Gold’s glittering rally is a reflection of markets anticipating deeper Fed cuts,” noted OCBC FX strategist Christopher Wong.
In India, gold prices also saw rise on Wednesday (August 21).
24k gold prices surged by ₹550 to ₹73,200 per 10 grams.
Traders have fully priced in a rate cut for the Fed’s September meeting, with a 68% chance of a 25 basis points reduction, according to the CME FedWatch tool.
Meanwhile, the dollar has slipped to its lowest point this year, and benchmark 10-year Treasury yields have also declined, making non-yielding bullion more appealing to investors.
Market participants are closely watching the minutes of the Fed’s July policy meeting, set for release later today, and Fed Chair Jerome Powell’s speech on the US economic outlook at Jackson Hole on Friday.
“Given that the markets have already expected deep cuts to some extent, the bar is high for Powell to out-dove markets. Some reality check may suffice and not ruling out a pullback on gold prices in the near term,” Wong was quoted as saying in a Reuters report.
The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported a 0.20% decline in its holdings on Tuesday from seven-month highs.
“While prices look to be headed lower, bears need to tread carefully, as I suspect strong support around previous records… and dip buyers will likely be tempted to return to the table,” City Index senior analyst Matt Simpson was quoted as saying in Reuters report.
Investment considerations
Given gold’s recent strong performance and current market conditions, it could be a prudent time to consider adding gold to the investment portfolio.
The precious metal has demonstrated resilience amid economic uncertainty and geopolitical tensions.
While the potential for short-term price fluctuations exists, especially with upcoming Fed decisions and market reactions, gold remains a valuable hedge against inflation and currency fluctuations.
Investors should carefully assess their risk tolerance and investment goals before diving into gold.
A well-balanced approach, such as diversifying investments to include gold while maintaining exposure to other assets, can help manage risk and capitalise on gold’s long-term growth potential.
