The price of gold jumped by about 0.5%, returning to the record high reached yesterday. Expectations of easing the Fed's monetary policy contribute to the growth of the precious metal, while the strengthening of the US dollar and an increase in US bond yields limit price growth.
According to the CME FedWatch Tool, markets see a 4.7% probability of a 25 basis point rate cut at the Fed meeting in July, a 96.2% probability of a rate cut in September, and a 98.5% probability of monetary policy easing in November. Overall, investors expect the Fed to cut the rate by more than 60 basis points by the end of the year. Lower rates increase the appeal of non-yielding bullion.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.06% to 103.80. Meanwhile, the yield on 10-year US bonds increased by 3.3 basis points to 4.178%.
Experts said that gold prices - the demand for which is increasing in times of economic and geopolitical uncertainty - may rise above the psychological level of $2,500 amid interest rate cuts by the Fed and the US presidential election.
Meanwhile, according to the World Gold Council, the inflow of funds into global physically backed gold exchange-traded funds continued in June.
According to Citi experts, over the next 6-12 months, the price of gold may rise to the range of $2,700-$3,000 per ounce. "Investors may want to hedge their equity and currency exposures as potential global trade war looms, especially between the U.S. and China, which could boost precious metals," Citi said.
Meanwhile, experts at the Bank of America Chief Investment Office said that the price of gold might hit $3,000 per ounce in the next 12 to 18 months. "Achieving this lofty price will largely depend on an uptick in non-commercial demand," the experts added.