The price of gold soared to a new all-time high on Tuesday 20 August, surpassing US$2,500 per ounce, as investors brace for potential interest rate cuts in the US. Several factors have influenced the metal’s dramatic rise in value of over 20% since the beginning of the year, including the prospect of lower borrowing costs. As central banks cut rates, gold — which offers no yield — becomes a more attractive investment relative to bonds. In the UK, the Bank of England cut the base rate from 5.25% to 5% at its August meeting. Investors expect the US Federal Reserve to follow suit, with minutes from its July meeting, released last Wednesday, revealing that a “vast majority” of committee members are in favour of an appropriate policy easing at the next meeting in September. Beyond interest rates, gold’s reputation as a safe-haven asset in times of global instability is further boosting demand. Ongoing conflicts in the Middle East and Ukraine, combined with turmoil in China’s equity and housing markets, have added to the appeal of the precious metal. As a result, many investors are seeking refuge in gold to shield their portfolios from market shocks and geopolitical risks, contributing to the recent surge in prices.
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