XAU/USD: Gold Surges to Fresh Record at $2,590. All Eyes on Fed’s Rate Decision.

Precious metal extended its record run early Monday with fresh buying from optimistic investors who hold onto hopes for half-point cut to interest rates.

• Gold prices XAUUSD shot higher to a fresh record on Monday as emboldened traders felt the rush to bet ahead of a super-duper important event this week. Bullion holders were locked in and fired up, pushing spot prices above $2,590 per ounce. Fueling the leg up is the conviction that the Federal Reserve might opt for a bigger cut to interest rates — a juicy 50bps (basis points) trim.
• The alternative is a smaller, casual and uninteresting 25bps cut to borrowing costs. Gold’s surge is largely built upon the first narrative where rates drop from their 23-year high of 5.5% to 5%. With that said, there’s a very real chance that Fed officials might decide to start small and do a quarter-point reduction. In any case, make sure to inspect your portfolio for any holes and protect it from the looming volatility.
• Another factor benefiting gold is the broad slip in the US dollar, especially against the Japanese yen. The USD/JPY pair dropped to a fresh 2024 low of ¥140.10 on Monday. The prospects of a more aggressive rate cut have dented the dollar’s valuation, sending gold higher. As a zero-yield asset, gold gets more attractive when rates shift to the downside as this reduces the opportunity cost of holding the precious metal.