Gold prices surged significantly on Wednesday as investors seek out safe-haven assets amid prospects of a rate cut by the Federal Reserve.
During the Asian trading session, London spot gold prices briefly approached 3,547 U.S. dollars per ounce during intraday trading, while gold futures on the New York Mercantile Exchange briefly surpassed 3,616 U.S. dollars per ounce, both marking historic new highs.
A recent report released by analysts at Morgan Stanley has projected that the Fed will announce a 25 basis point rate cut at its September meeting, followed by another cut before the end of the year. Historical data indicates that in the two months following the initiation of a rate cut cycle by the Fed, gold and silver typically experience significant increases, with gold prices on average rising by approximately 6 percent.
Meanwhile, Fed Chairman Jerome Powell's recent dovish stance has considerably bolstered expectations of a rate cut in the market, leading to the recent increase in precious metal prices.
On Sept 5, the U.S. Bureau of Labor Statistics (BLS) will release the non-farm payroll data for August. Previously, the BLS significantly revised down the non-farm payroll data for May and June by 258,000, far beyond market expectations, causing severe turmoil in the U.S. capital markets as the dollar and U.S. stocks plummeted, while U.S. bonds and gold rapidly strengthened.
Gold prices surge to record highs amid escalating safe-haven demand
The U.S. consumer price index (CPI) rose 4.2 percent year on year in May, marking its highest level since May 2023, as energy prices remained high, according to data released by the U.S. Bureau of Labor Statistics on Wednesday.
Notably, the energy index for May increased 3.9 percent month on month, accounting for over 60 percent of headline inflation.
Gasoline and fuel oil prices increased 40.5 percent and 58.9 percent year on year, respectively, in May.
The national average price of gasoline reached 4.555 U.S. dollars per gallon on May 20, a 50 percent rise since the Iran conflict started in February, according to data released by the American Automobile Association. The price later eased to 4.151 dollars per gallon on Wednesday.
The core CPI, which excludes volatile food and energy prices, increased 2.9 percent year on year in May.
Statistics show that U.S. headline CPI for May rose 0.5 percent month on month, down from 0.6 percent in April, while core CPI increased 0.2 percent, compared with a 0.4 percent gain in April and below the market consensus forecast of 0.3 percent.
The report arrives at a critical juncture for markets and Federal Reserve policymakers. While the rate-setting Federal Open Market Committee is widely expected to hold interest rates steady at its June 17 meeting, policymakers acknowledged that the inflation surge caused by the Iran conflict will likely delay any rate reduction. The data are likely to reinforce this stance.
Oil prices rose while U.S. stocks traded lower in the morning session on Wednesday after U.S. President Donald Trump posted on Truth Social that Iran has "taken too long to negotiate a deal" and will "have to pay the price."
U.S. May CPI rises to highest level since May 2023
