Gold futures experienced a slight decline today, with the most active December contract closing marginally lower. Despite this small setback, the yellow metal received support from a weakening U.S. dollar. Over the past two trading sessions, the dollar has dropped more than one percentage point, offering a cushion for gold prices.
The U.S. dollar has shown notable weakness recently. Last Friday, the dollar index opened above 103 but closed at 102.397, reflecting a 0.62% drop. Today’s trading saw the index fall below 102 for the first time since early January 2024, marking a significant 2.11% decline for the dollar in August alone, following a 1.74% decrease in July. This results in a nearly 4% loss in the dollar’s value over the past two months.
This dollar weakness has been instrumental in driving gold prices to new highs. Last Friday, gold closed at a record $2,546.20, surpassing the previous high of $2,521.50 set on July 16. Gold has now achieved four new record closing prices this year, with two occurring in the past six weeks.
The underlying cause of gold’s strength and the dollar’s decline is the growing anticipation of potential interest rate cuts by the Federal Reserve. Although the Fed maintained rates at 5.25% to 5.5% during its July meeting, market expectations for a rate cut in September are high. The CME’s FedWatch tool currently indicates a 100% probability of a rate cut, with a 77.5% chance of a 0.25% reduction and a 22.5% likelihood of a 0.5% cut.
Attention now turns to the upcoming economic symposium in Jackson Hole, Wyoming. Sponsored by the Federal Reserve Bank of Kansas City since 1978, this annual event gathers central bankers, business leaders, policymakers, economists, and government officials to address key economic issues. Scheduled for August 22-24, this year’s symposium is titled “Reassessing the Effectiveness and Transmission of Monetary Policy.”
Market participants are keenly awaiting Federal Reserve Chairman Jerome Powell’s speech on the symposium’s first full day. His comments are anticipated to provide crucial insights into the Fed’s current strategy and future outlook, potentially impacting both gold prices and the strength of the dollar in the weeks ahead.
The recent dollar decline has provided support for gold, moderating today’s minor price drop and paving the way for further record-breaking performances in the precious metals market.
