Expectations of Federal Reserve rate cuts heat up, gold breaks historical high to $4500

Against the backdrop of increasing uncertainty in the global economic outlook, gold prices have recently hit a historic high above $4,500. Behind this rally is investors’ continued pursuit of safe-haven assets.

Fundamental Factors Drive Gold Price Upward

Recently released US economic data underperformed expectations. Inflation growth was lower than expected, and signs of cooling appeared in the labor market. These signals have led the market to reassess the Federal Reserve’s policy direction. Analysts generally expect the Fed to cut interest rates at least twice next year, by 25 basis points each time.

Rate Cut Expectations Benefit Gold

Interest rate levels have a profound impact on gold trends. A lower interest rate environment reduces the opportunity cost of holding gold—after all, gold itself does not generate income. The lower the interest rates, the smaller the cost of forgoing other yield-generating assets to allocate to gold. As rate cut expectations heat up, more and more funds are flowing into this traditional safe-haven asset.

The continued influx of safe capital is pushing up gold prices, creating new record levels. This reflects market concerns about economic downside risks and expectations of a policy shift by the Federal Reserve. In this market environment, gold’s status as the ultimate safe asset is reaffirmed.