Gold soars to new peak as US data fuels expectations for deeper rate cuts

Gold rose to a record high as it advanced more than 1 per cent in the previous session, on account of weak US data that strengthened the case for deeper rate cuts. Silver was near the highest in four months, according to a report by Bloomberg.

Prices for gold climbed as high as 0.3 per cent above $2,665 an ounce and surpassed Tuesday's all-time high after a report showed US consumer confidence this month dropped the most in three years. Silver rose 4.6 per cent on Tuesday for its biggest one-day advance in four months.

Swaps traders wagered on more than three-quarters of a point of easing by the Fed this year. Gold and silver both tend to benefit when rates are low because they offer no interest, and a weaker dollar simply makes them cheaper for many buyers.

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Their movement largely takes place in tandem as both offer similar macro-and currency-hedging properties. Still, white metal is far more sensitive to the economic cycle than yellow metal because white metal is also an industrial commodity useful in clean-energy technologies, including solar panels, among others.

A shot in the arm for industrial metals came on Tuesday as Beijing announced a series of measures to address the country's economic malaise and targeted the real estate market in particular.

“The main driver for silver in the last few weeks has been the gold rally — which got another boost yesterday from higher rate-cut expectations following the weak consumer confidence report,” said Zhong Liang Han, an analyst at Standard Chartered Plc. However, the “rally in industrial metals following China’s broad stimulus package was the key driver behind the next leg of the up-move in silver.”

Gold is now up nearly 30 per cent this year while silver has gained 35 per cent, rallies surging since the Fed's half-point cut last week. The yellow metal has been supported by robust central bank purchases and heightened geopolitical tensions driving haven demand. A too-close-to-call US presidential election that might prove massively consequential for financial markets is now fewer than six weeks away.

Spot gold advanced to a record $2,665.25 an ounce and traded 0.2 per cent higher at $2,662.77 as of 10:34 a.m. in Singapore. The Bloomberg Dollar Spot Index was little changed after sinking 0.5 percent in the previous session.

Silver is getting attention given the sharp rally in gold, especially as investors look for catch-up buying opportunities, said Joni Teves, a precious metals strategist at UBS Group AG.

“The move in industrial commodities is likely also providing an additional boost,” Teves said. “Our bullish outlook for silver is unchanged; we think it can outperform in this environment of rising gold prices, Fed easing and forecasted silver market deficits.”

Silver fell 0.5 per cent in Singapore to $31.9435 an ounce. Palladium and platinum dipped.

Investors will now be waiting for more US data, including the personal consumption expenditures gauge and jobless claims, later this week, that should give more indications on the Fed's likely easing path.