Gold races past US$3,800/oz level as softer dollar, rate-cut bets lift appeal

GOLD surged above the key US$3,800-per-ounce level for the first time ever on Monday, supported by a weaker dollar and growing expectations that the Federal Reserve will cut interest rates further this year.

Spot gold jumped 1.1 per cent to US$3,801.88 per ounce by 0435 GMT. US gold futures for December delivery rose 0.6 per cent to US$3,831.90.

The US dollar index eased 0.2 per cent against its rivals, making greenback-priced bullion less expensive for overseas buyers.

The US Commerce Department said on Friday its Personal Consumption Expenditures Price Index (PCE) rose 0.3 per cent in August, versus a 0.2 per cent increase in July, matching the estimate of economists polled by Reuters.

“That benign inflation print in the United States has given the markets reason to believe further Fed cuts are coming in October and December,” said Capital.com analyst Kyle Rodda.

“Sentiment is very bullish and we are on track to retest another record high this week. The gold market is positioned quite long at the moment and that may be pointed to as being a reason to be cautious about future upside.”

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Traders are currently pricing in a 90 per cent chance of a Fed rate cut in October, with around a 65 per cent probability of another easing in December, according to the CME FedWatch Tool.

Safe-haven bullion thrives in a low interest rate environment and in times of geopolitical and economic uncertainty.

Share markets got off to a cautious start in Asia on Monday as investors braced for a possible shutdown of the US government.

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Investors now await US data on job openings, private payrolls, the ISM manufacturing PMI and the non-farm payrolls report for further clues on the economy’s health.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.89 per cent to 1,005.72 metric tons on Friday from 996.85 tons on Thursday.

Elsewhere, spot silver rose 2.4 per cent to US$47.08 per ounce, platinum climbed 3.4 per cent to US$1,622.04 and palladium gained 2.2 per cent to US$1,297.67. REUTERS