Gold futures touch new high on U.S. rate cut hopes; ANZ sees $2,550 by year-end

Gold futures ticked higher to a new record high for the front-month contract on Tuesday, as data on U.S. producer prices showed inflation continues to moderate, adding to optimism around the Federal Reserve’s rate cut path, which sent Treasury yields lower and lifted equities.

Total PPI rose by a smaller than expected 0.1% in July while core PPI, which excludes food and energy, was flat; the monthly figures left total PPI up 2.2% Y/Y compared to 2.7% in June, and core PPI was up 2.4% vs. 2.9% in June.

The dollar was down 0.4% against its rivals, making gold more attractive for other currency holders, while the benchmark 10-year Treasury note yield fell 6 bps to a one-week low 3.85%.

“Despite recent profit-taking, ongoing geopolitical tensions and recent volatility in the market along with the anticipated rate cut continue to drive investors toward safe-haven,” Allegiance Gold’s Alex Ebkarian said, according to Reuters.

The upside bias may continue tomorrow if the release of the July Consumer Price Index matches the market’s view.

Comex gold (XAUUSD:CUR) for August delivery closed +0.1% to $2,466.70/oz, a fifth straight daily gain and a new record high settlement for the front-month contract, while front-month August Comex silver (XAGUSD:CUR) settled -0.8% to $27.695/oz.

ETFs: (NYSEARCA:GLD), (NYSEARCA:GDX), (GDXJ), (IAU), (NUGT), (PHYS), (GLDM), (AAAU), (SGOL), (BAR), (OUNZ), (SLV), (PSLV), (SIVR), (SIL), (SILJ)

Geopolitical tensions in the Middle East and speculation about upcoming interest rate cuts in the U.S. are providing tailwinds, although these have been slightly scaled back in recent days, Commerzbank analysts said, as reported by Dow Jones.

The release of the U.S. July producer price index showed that factory-gate inflation slowed slightly from June, and as inflation continues to subside it reinforces expectations that the Fed will begin cutting rates from next month, the bank said.

ANZ analysts see gold touching $2,550/oz by year-end, Dow Jones reported, with central bank purchases and physical demand supporting demand, and China’s elevated gold imports as well as India’s improving rural incomes and import duty cuts will increase their gold consumption in the next few months.

Any price weakness will boost gold’s attractiveness, capping downside, and investors also may hedge against market volatility resulting from the U.S. elections, ANZ added.