Gold Strives New Records

Gold prices rose by 2.6% to $2473 per troy ounce this week, reaching a new all-time high of $2483 on July 17, after starting the week at $2450 on July 16. This surge was influenced by an assassination attempt on Donald Trump and unexpected dovish signals from Federal Reserve (Fed) Chair Jerome Powell.

The assassination attempt had a mixed impact on gold prices. On one hand, Trump's potential increase in fiscal spending and trade tariffs could push inflation up, necessitating higher interest rates for longer, which is typically unfavorable for gold. On the other hand, the attempt heightened political tensions in the United States, potentially leading to further uncertainties or even new assassination attempts. Such instability creates a fertile ground for gold prices to rise.

Fed Chair Jerome Powell's unexpected dovish remarks on Monday were a significant driver of gold's rise. He expressed confidence in achieving the 2.0% inflation target, highlighting a decline in inflation data from April to June, with June's inflation slowing to 3.0% YoY, better than the consensus of 3.1%. He hinted at potential interest rate cuts before inflation returns to the 2.0% target, contrasting sharply with his hawkish testimony in Congress the previous week.

Despite these dovish remarks and political tensions, gold prices edged up moderately by 0.4% to $2439 per ounce on Monday. Bets on interest rate cuts by the Fed in September reached an unprecedented 100.0%, briefly hitting 100.1% due to a technical error, and then slightly retreating to 98.1% on Thursday, still showing solid investor confidence according to the CME FedWatch Tool.

Large investors are betting on rising gold prices, evidenced by significant inflows into the SPDR Gold Trust (GLD). In the last two weeks, there were net fund inflows of $430.9 million and $22.4 million, respectively, with an additional $559.1 million this week. Investors are positioning themselves for further increases in gold prices, driven by the blend of political instability and dovish signals from the Federal Reserve.