- Bets for an imminent start of the Federal Reserve's rate-cutting cycle in September have put the US Treasury bond yields and the US Dollar under pressure, which, in turn, lifted the Gold price to a fresh record high on Tuesday.
- According to the CME Group's FedWatch Tool, the markets are currently pricing in just over a 70% chance that the US central bank will lower borrowing costs by 25 basis points at the September FOMC monetary policy meeting.
- Moreover, a Reuters poll indicated that a slim majority of economists expect that the Fed will cut interest rates by 25 bps at each of the remaining three meetings of 2024, one more rate reduction than predicted last month.
- Fed Governor Michelle Bowman tried to temper expectations of a near-term rate cut and said that despite the recent progress, price growth levels remain well-elevated and still uncomfortably above the central bank's 2% goal.
- The People's Bank of China (PBOC) granted new gold import quotas to several Chinese banks last week in anticipation of reviving demand, suggesting that another Chinese gold buying spree could be on the horizon.
- Furthermore, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, jumped to their highest in seven months at 859 tons on Monday and pointed to improving financial investment demand.
- Meanwhile, geopolitical concerns, particularly in the Middle East and a potential ceasefire between Israel and Hamas, keep investors on edge and turn out to be another factor underpinning the safe-haven XAU/USD.
- Traders, however, turn cautious ahead of the release of the July FOMC meeting minutes later this Wednesday and Fed Chair Jerome Powell's speech on Friday, which will be looked for cues about the future policy path
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