• Gold hits a new record high after China offloads stimulus and cuts interest rates. 
• Continued bets that the Fed will make another jumbo cut before year-end also fuel the rally. 
• Increased conflict in the Middle East threatens to escalate into all-out war, driving safety flows. 
   

Gold (XAU/USD) breaks above its previous all-time high to reach a new record of $2.640 per troy ounce on Tuesday. Market bets of more aggressive interest rate cuts from the Federal Reserve (Fed) are a major driver. The news of a big stimulus push in China, which includes interest rate cuts, is also a factor. Meanwhile, escalating geopolitical tensions in the Middle East are increasing safe-haven flows into the yellow metal. 

Lower interest rates are positive for Gold, as they reduce the opportunity cost of holding the non-interest-paying asset, making it more attractive to investors.

Gold hits new highs as market foresees more cuts coming

Gold peaks as market-based probabilities of the Fed making another double dose 50 basis points (bps), or 0.50%, rate cut remain high. The chances of such a cut at the meeting in November currently stand at 50.2% versus 49.8% for a 25 bps cut, according to the CME FedWatch tool. 

On Monday, Fed Bank of Atlanta President Raphael Bostic – a voting member – was relatively neutral in comments about the policy, scoring a 4.0 on FXStreet’s FedTracker, which gauges the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10, using a custom AI model.

Non-voting Fed Bank of Atlanta President Austan Goolsbee struck a much more dovish tone, saying inflation had “come way down” and there would be “many more” cuts on their way. His comments scored a 2.0 on FXStreet’s FedTracker.

Fed Bank of Minneapolis President Neel Kashkari (non-voting member) was neutral, scoring a 3.6  on the FedTracker.