'Unstoppable' Gold Prices Soar Past $3,600, Setting New All-Time Highs

Complex Factors at Play: Expectations of US Rate Cuts, Inflation Concerns, and Worries Over Fed Independence

Silver Spot Prices Also Reach Highest Level Since September 2011

Gold bars [Reuters Yonhap News Photo. Reproduction and DB prohibited]

International gold prices have once again broken through to a new all-time high, surpassing $3,600 per ounce.

Spot gold prices traded at an intraday high of $3,646.29 per ounce on the London Bullion Market Association (LBMA) on the 8th (local time), setting a record, Reuters reported.

Gold futures for the nearest delivery month (December) on the Chicago Mercantile Exchange (CME) closed at $3,677.40 per ounce, up 0.7% from the previous day.

International gold prices first crossed the $3,500 mark on the 1st, and within just one week, they have now surpassed the $3,600 threshold in spot terms.

Peter Grant, Vice President at gold dealer JM Bullion, predicted that gold prices could continue their upward momentum to between $3,700 and $3,730 in the short term.

The Financial Times (FT) pointed out that expectations of an imminent cut in the US benchmark interest rate, coupled with concerns over the independence of the US central bank, the Federal Reserve (Fed), have sharply driven up gold prices.

The analysis also indicated that concerns over US inflation and the rising national debt have diminished the appeal of the US dollar as a safe-haven asset.

According to the FT, gold prices have risen by 9% in the past three months and a remarkable 37% year-to-date.

Following the release of a weaker-than-expected US employment report on the 5th, the market is almost taking a US benchmark interest rate cut as a foregone conclusion.

Ahead of the Federal Open Market Committee (FOMC) meeting on the 16th-17th, where the US benchmark interest rate will be decided, the market views a 0.25 percentage point rate cut as highly probable. Some traders have begun betting on a so-called 'big cut' (a 0.5 percentage point interest rate reduction).

Interest rate cuts typically lead to a decline in yields for bonds, including US Treasury bonds, a traditional safe-haven asset, thus acting as a driver for higher gold prices.

Gold jewelry displayed at a jewelry store in Manhattan, New York, USA [AFP Yonhap News Photo. Reproduction and DB prohibited]

Chris Turner, Global Head of Markets Research at ING, stated, "The expectation of Fed rate cuts is strengthening gold's position as an inflation hedge."

Turner noted that amid persistent inflation, investors anticipate the Fed's monetary easing cycle to be earlier and deeper. "Real interest rates appear ready to turn negative again, and as an inflation hedge, gold is set to outperform other assets," he predicted.

The decline in the value of the US dollar has also contributed to the rise in gold prices, as it makes gold cheaper for holders of other currencies. The dollar has fallen by 10% against a basket of major currencies year-to-date.

The FT also pointed out that President Donald Trump's attempts to dismiss Fed Governor Lisa Cook, who participates in benchmark interest rate decisions, have reignited market fears of further inflation.

Fed Governor Lisa Cook and President Donald Trump [Yonhap News Photo. Reproduction and DB prohibited]

Central banks worldwide have been increasing their gold holdings, purchasing record amounts in recent years, thereby boosting gold demand. Last year, gold accounted for the second-largest portion of these central banks' foreign exchange reserves, surpassing the Euro.

Atakan Bakiskan, a US economist at investment bank Berenberg, anticipates the upward trend in gold prices to continue. He stated, "As foreign investors lose confidence in the United States, some foreign investment demand will continue to shift from US Treasury bonds to gold."

Meanwhile, spot silver prices rose 0.8% to trade at $41.29 per ounce on the day, marking the highest level since September 2011.