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Gold futures reached new record highs on Monday as a weaker dollar and talks of potential Federal Reserve rate cuts fueled the surge.
A notable milestone was crossed as a single gold bar achieved a value of $1 million, with gold prices peaking over $2,500 per ounce.
In the first half of this year, central bank net purchases of gold surged to 483.3 tons, equivalent to nearly 40,000 gold bars, which has been a significant driver behind this year’s impressive gold rally driven by expectations of looser monetary policy from the U.S. Federal Reserve.
Market prices saw a sharp incline on Friday and have since remained heightened due to a dip in the U.S. dollar and U.S. Treasury yields, according to SP Angel analysts as reported by Dow Jones.
The Chinese central bank’s issuance of new gold import quotas to Chinese banks has sparked speculation of increased buying activities, with gold being seen as a safe haven amidst the current economic climate.
Encouragement for regional banks to invest funds into the economy rather than bond markets has further driven Chinese buyers towards gold as an alternative secure asset, according to SP Angel.
December delivery of the most-active Comex gold ended slightly higher at $2,541.30/oz, surpassing the previous all-time high and reaching an intraday peak of $2,549.90 on Monday, the highest ever seen.
The front-month contract for August Comex gold also closed at a record high of $2,501.80/oz, while August silver settled at $29.240/oz, marking its strongest finish since July 18.
Analysts anticipate a potential consolidation in the gold market, with concerns raised about the impact of a smaller Federal Reserve rate cut announcement triggering a dip in the gold price.
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, expressed caution stating that the rapid increase last week had pushed gold prices to an uncomfortable level for many traders, signaling a possible correction in the market.
Investors have already factored in the expectation of a significant rate cut by the Federal Reserve, and failure to signal such a move during the upcoming meeting could potentially lead to further gold selloffs, according to Aslam.
