Interest rate cut expectations ignite "gold rush"! Gold prices break through historical inflation peaks, silver prices rise to a 13-year high

Driven by expectations that the Federal Reserve is preparing to lower U.S. interest rates, gold is poised to rise for the fourth consecutive week, with inflows into gold-backed exchange-traded funds also providing support for gold prices.

Gold prices have broken through $3,650 per ounce, rising nearly 2% this week, and reached a record high during intraday trading on Tuesday. Silver prices, which are correlated, have also surpassed $42 per ounce, reaching their highest level since 2011. Thursday's data showed that U.S. consumer prices rose as expected in August, providing room for Federal Reserve policymakers to lower borrowing costs following a series of weak labor market data.

Traders have priced in at least a 25 basis point rate cut at the Federal Reserve's meeting next week, with the possibility of two more cuts by the end of the year. The dollar and 10-year Treasury yields have declined this week. Lower borrowing costs, falling yields, and a weaker dollar are typically favorable for precious metals.

Gold has risen nearly 40% this year, becoming one of the best-performing commodities, outpacing other market benchmarks including the S&P 500 index. Central bank purchases, geopolitical uncertainty, and ETF inflows have supported this rally. In addition to setting a nominal record this week, gold prices have also surpassed the inflation-adjusted peak set over 45 years ago.

Priyanka Sahdev, an analyst at the Singapore Exchange, stated that as gold prices have more than doubled over the past three years, "the risk of a buy-and-hold strategy at these levels is increasing. Investors are more inclined to trade based on news and momentum rather than holding long-term, which means price movements will remain active but not one-sided."

She noted that if investors are looking to enter the precious metals rally at a lower cost, silver may benefit.

According to data compiled by Bloomberg, gold-backed ETFs have added nearly 25 tons so far this week.

Former President Trump’s efforts to expand his influence over the Federal Reserve have also supported gold prices. On Thursday, he requested an appeals court to suspend a lower court ruling that blocked his attempt to remove Federal Reserve Governor Lisa Cook on the grounds of alleged mortgage fraud. The government has requested a ruling by Monday at the latest, the day before Federal Reserve policymakers will begin their September meeting.

As of the time of writing, gold prices are up 0.6% to $3,654.38 per ounce. The Bloomberg Dollar Spot Index has edged up slightly but has fallen 0.3% this week. Palladium has risen nearly 8% this week, while platinum has climbed toward $1,400 per ounce.

In Asia, Thai households are preparing to increase gold purchases for the fifth consecutive year, as the appreciation of the local currency makes gold cheaper. This complicates the central bank's efforts to curb the impact of gold on the Thai baht