The gold price trajectory remains bullish, driven by expectations of an interest rate cut in September this year. These expectations come amid a dovish Federal Reserve and a surge in central bank gold purchases globally. This view is further reinforced by market unpredictability and rising geopolitical tensions.
The ongoing economic crisis due to COVID-19 has further accelerated this bullish trend. As a result, investors around the world have started turning their attention to gold as a potentially profitable investment. Moreover, experts suggest that new advances in gold mining technology may stabilize the supply chain in the near future.
Last week, gold rose for the third straight week, registering an astounding +0.81% gain. The sustained rise in gold prices, coupled with steadily rising inflation and growing economic uncertainty, has made gold the preferred asset for many investors.
Gold on bullish trajectory amid rate cut expectations
Despite occasional pullbacks, gold appears to be holding strong above the $2,400 level.
Some experts say the decline in the U.S. consumer price index signals an end to the Federal Reserve’s period of severe monetary tightening. Federal Reserve officials such as San Francisco Fed President Mary Daly and Chicago Fed President Austen Goolsby support this theory, acknowledging the possibility of future rate cuts.
Lower interest rates could stimulate investment in the commercial sector and lead the U.S. economy into a new period of monetary easing. At the same time, recent data points to easing price pressures and labor conditions in the country. As a result, the probability of a September interest rate hike has risen to a staggering 96%, creating a favorable environment for gold.
However, the inflation story has been complicated by a slight increase in the Producer Price Index in June. This unexpected spike suggests that the inflation outlook is murkier, highlighting the growing uncertainty in projecting future inflation trends and presenting a major challenge for policymakers.
Despite these complexities, global conflicts, international trade disputes, global growth patterns, and consistent gold purchases by global central banks make gold an attractive, reliable asset. Hence, the outlook for gold is bright despite the uncertainty in the global economy.
