Gold Scales New Peak Amid Increasing Rate Cut Expectations

(RTTNews) - Gold prices rose sharply to set a new record high on Tuesday, as investors are betting high on a rate cut by the Federal Reserve later this month. Markets remained closed for Labor Day on Monday.

Front Month Comex Gold for September delivery surged by $75.70 (or 2.18%) to $3,549.40 per troy ounce. Notably, this is a new record high for gold.

Front Month Comex Silver for September delivery shot up by 87.10 cents (or 2.17%) to a new 52-week high of $41.071 per troy ounce today.

The "carrot and stick" approach adopted by the US President Donald Trump to end the three-plus-year long Russia-Ukraine war has not yielded tangible results.

Ignoring Trump's call for negotiating with Ukraine, Russia intensified its attacks on Ukraine last week and continued today.

Reportedly, Russian President Vladimir Putin had stated that the Trump administration is listening to the Russian side of arguments for its aggression on Ukraine.

With no sign of the conflict subsiding, this geopolitical tension supported gold on the upside.

Since 2022, when Russia invaded Ukraine, central banks have accumulated their gold deposits by doubling their purchases.

On the monetary front, after last week's inflation report, expectations for a rate cut are increasing among investors.

After criticizing the Fed Chair Jerome Powell for keeping interest rates unchanged, Trump sacked Fed governor Lisa Cook last Monday over allegations of mortgage fraud. Trump's assertive moves over the Fed weighed on the US Dollar, which in turn has made gold less expensive for overseas buyers.

According to CME Group's FedWatch Tool, traders are currently betting on a 91.8% chance of a 25-basis-point rate cut in the next FOMC meeting to be held on September 16 to 17.

The US non-farm payrolls data to be released this coming Friday may shed more light on the outlook for rates.

On the trade front, with a US Federal Appeals Court ruling that Trump's "reciprocal tariffs" are illegal, new uncertainty has surfaced for all the trading partners. However, the court allowed the tariffs to remain in place to permit the Trump administration to appeal the judgment in the Supreme Court.

Concerns from new tariff challenges to doubts over the independence of the US central bank, pushed investors towards the precious metal.