Gold hits record high on global uncertainties; silver marginally down

Gold prices reached all-time highs on Wednesday, bucking the trend of a rising dollar, which put additional pressure on both the yen and the euro. Meanwhile, global stocks dipped as investors hesitated to make significant investments in light of the upcoming U.S. election.

As of 0748 GMT, spot gold was trading at $2,754.25 per ounce, following a record high of $2,755.30 earlier in the session. Meanwhile, U.S. gold futures increased by 0.3%, reaching $2,768.40.

Additionally, investors are reassessing the extent to which the Federal Reserve may need to reduce interest rates, following recent U.S. economic data that indicates continued growth and job creation in the economy.

“Gold prices saw another positive move, supported by gains in Comex, where gold moved closer to $2750. The ongoing favorable interest rate cycle has been one of the main factors supporting gold’s rise. In addition, uncertainty around the upcoming U.S. election outcome is also playing a role in keeping gold prices elevated, as such political events often spur demand for safe-haven assets like gold,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

What's behind the rally?

Markets are anticipating a 92 per cent probability of a 25-basis-point rate cut at the Fed's upcoming meeting in November, with another 25-bps cut expected by the end of the year.

Just a month ago, traders were forecasting a potential reduction of up to a full percentage point by January. Meanwhile, the yield on benchmark U.S. 10-year notes reached three-month highs, rising by 3.8 basis points to 4.244 per cent.

Gold has ignored the strength of the U.S. dollar and surged to a new record high of $2,757.99 an ounce. The demand for safe-haven gold is partially fueled by concerns over the upcoming U.S. elections and geopolitical tensions in the Middle East and Europe.

"Another critical data point to watch this week is the Initial Jobless Claims report on Thursday, which is expected to come in at 243K compared to the previous 241K. If jobless claims remain low, it would point to a stronger U.S. economy, which could temper expectations of aggressive interest rate cuts. This could, in turn, trigger some profit-booking in gold after the recent bull run. In such a scenario, a retracement towards the support levels of ₹77,000 - ₹77,500 in MCX is possible, especially if jobless data indicates better economic strength. However, as long as gold remains above these support levels, the overall trend remains bullish," Trivedi added.

Bullion, which has increased by 33 per cent this year, was last down 0.8 per cent at $2,726.51 an ounce, while U.S. gold futures dipped 0.1 per cent to $2,741.50 an ounce.

Spot silver decreased by 0.4 per cent to $34.68 per ounce, following a peak of $34.87 in the previous session, which was its highest level since late 2012.