Gold prices surged to the $2,666 range on Wednesday, hitting another record high as markets increasingly bet on more aggressive policy easing by the U.S. Federal Reserve (Fed) and react to heightened geopolitical tensions in the Middle East.
By 1:00 pm AEST (3:00 am GMT) spot gold was up 9.5 points or 0.4% to 2666.6.
U.S. economic data on Tuesday has kept the U.S. Dollar (USD) near its year-to-date low, further supporting the rally in gold, a non-yielding asset.
However, during the Asian trading session, bullish momentum slowed slightly as traders remained cautious ahead of speeches from several Fed officials this week.
Market participants are also focused on Friday's release of the U.S. Personal Consumption Expenditure (PCE) Price Index, which is expected to influence the Fed's future rate-cut decisions and potentially set the direction for the next move in gold prices.
Currently, the CME Group’s FedWatch Tool indicates that markets are pricing in a more than 75% chance of a 50-basis-point interest rate cut by the Federal Reserve in November.
Tuesday’s weaker U.S. macroeconomic data further weighed on the USD, pushing it closer to its year-to-date low, which in turn boosted gold prices to a fresh peak.
The Conference Board’s Consumer Confidence Index fell sharply in September, dropping to 98.7 from 105.6 in August, while the Present Situation Index declined to 124.3 from 134.6.
Meanwhile, a survey by the Richmond Fed showed continued sluggishness in the U.S. manufacturing sector, with the composite manufacturing index falling to -21 in September, compared to -19 in the previous month.
Geopolitical tensions also played a role in supporting gold prices, as continued Israeli airstrikes in southern and eastern Lebanon raised fears of a broader conflict in the Middle East.
In addition, the U.S. PCE Price Index, which will be released on Friday, is likely to play a key role in shaping short-term USD demand and, by extension, the outlook for gold prices.