Interest Rate Cuts and Gold Value

Recent positive inflation data and comments from US Federal Reserve officials have reinforced expectations for interest rate cuts, with markets now anticipating these cuts to begin from September. Lower interest rates tend to benefit gold, reducing the opportunity cost of holding the yellow metal compared to other safe-haven assets like government bonds. Concurrently, the weakening US Dollar has pushed gold prices higher in USD terms. 

For those buying gold in GBP, the strengthening Pound has mitigated the impact of rising USD prices, though other factors continue to drive gold's breakout. Investors are increasingly mindful of the upcoming US elections and the potential impact of a second-term President Trump or President Biden on their portfolios. Geopolitical comments from candidates, such as Donald Trump's remarks on Taiwan, have spurred a surge in safe-haven gold buying in recent days. 

Following the comments the value of gold being bought and sold on The Royal Mint’s website was 69% higher than the average this year, and 130% higher than the rest of July so far. Customers bought and sold gold in roughly equal measure, reflecting investors’ anticipation of further price growth and those seeking to capitalise on recent highs. 

A snap survey by the London Bullion Market Association found consensus that analysts expect gold prices will continue to rise above recent all-time highs in the second half of the year, with one analyst predicting the price to soar to $2,650 – almost 28% higher than the start of the year. 

With US elections looming and changes in monetary policy seemingly imminent, could now be a good time to review your investment portfolio? 

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