The fear of recession blow on gold prices. The yellow metal, whose futures in the session on Friday August 2 exceeded 2,500 dollars per ounce, did not retreat and remained at record levels: on the morning of August 5 the spot price, reflecting short-term demand, was close to the all-time high of $2,483 recorded in July 2024.
The rate will be reduced
they, safe haven assets par excellence, benefiting from an uncertain macroeconomic scenario, allowing for rate reduction interest of central banks. In particular, recent macroeconomic data on job market brought back the image of a slowing American economy: in July the unemployment rate rose to 4.3% while the PMI index of the manufacturing sector recorded a sharp contraction, falling to 49.6 points (a figure below 50 points indicate decreased activity).
With the American economy slowing, the path to the first interest rate cuts by the Federal Reserve (Fed) appears clear. The first cut, taken for granted by the market, is expected in September. But according to Jeffrey Roach, chief economist at Lpl Financial, the cuts could now increase to three by the end of 2024. And with rates falling, the appeal of gold is increasing as other low-risk investments, starting with bonds, become less attractive.
Gold against penalties
But the price of the precious metal is also supported by the growing demand for emerging countries. The central banks of some states are in fact buying gold in large quantities to have reserve wealth in case of penalties, because gold cannot be stolen. According to the data reported by Wall Street Journal, starting in the third quarter of 2022, emerging countries alone (excluding China) would have added 2,200 tons of the precious metal to their reserves for a cost of 170 billion dollars, equivalent to a fifth of global demand. (All rights reserved)