The precious metals market saw a minor pullback in gold futures today, with the most active December contract closing slightly lower. Despite this minor pullback, the yellow metal was supported by a weaker US dollar. Over the last two trading days, the greenback recorded a significant decline of over a percentage point, providing support to gold prices.
The dollar’s recent performance has been notable. The dollar index opened above 103 last Friday and closed at 102.397 after a 0.62% decline. Today’s trading was marked by further weakness, with the index falling below 102 for the first time since early January 2024. This represents a significant loss of 2.11% for the dollar in August alone, following a 1.74% decline in July. The cumulative effect is a nearly 4% decline in the dollar’s value over the past two months.
This dollar weakness has played a key role in the recent rise in gold prices to record highs. Last Friday, gold made history when it closed at an unprecedented $2,546.20, surpassing the previous record of $2,521.50 set on July 16. Gold has set four new record closes this year, two of them in the last six weeks.
The driving force behind gold’s strength and dollar weakness is growing optimism about potential rate cuts by the Federal Reserve. While the Fed kept rates at their current levels of 5.25-5.5 percent during the July FOMC meeting, market expectations for a September rate cut are high. CME’s FedWatch tool shows a 100 percent probability of a rate cut, with a 77.5 percent probability of a 0.25 percent cut and a 22.5 percent probability of a 0.5 percent cut.
All eyes are currently on the upcoming Economic Symposium in Jackson Hole, Wyoming. This annual event, sponsored by the Federal Reserve Bank of Kansas City since 1978, brings together central bankers, business leaders, politicians, economists and government officials to discuss critical economic issues. This year’s symposium, titled “Reassessing the Effectiveness and Transmission of Monetary Policy,” is scheduled for August 22-24.
Market participants are eagerly awaiting Federal Reserve Chairman Jerome Powell’s speech on the first full day of the event. His remarks are expected to provide valuable insight into the Fed’s current strategy and outlook, potentially influencing both the price of gold and the strength of the dollar in the coming weeks.
The recent dollar weakness has undoubtedly given gold a boost, mitigating today’s slight price decline and setting the stage for potentially further record developments in the precious metals market.
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