· Whyhave Gold prices risen to record highs?

· FederalReserve rate cut expectations

· Safehaven demand amid geopolitical uncertainty

· Centralbank buying

· TradingGold with PXBT

Gold prices have been on a tear this year, rising for seven straight months.The precious metal trades 21% higher year to date, reaching a record high of$2531 while outperforming global stocks. The US SP500 is up 16% this year, theNikkei 225 has booked gains of 10%, and the EuroStoxx 50 has risen 6%. Gold hasalso outperformed the most major currency pairs. Few markets have risen as fastas Gold so far in 2024.

Why have Goldprices risen to record highs?

Federal Reserverate cut expectations

One of the main reasons that gold prices have risen so sharply this year isthe expectation that the Federal Reserve will cut interest rates aggressivelyas US inflation has cooled towards the central bank’s 2% target, and growth isshowing signs of slowing. Weak data has even raised concerns that the US couldbe heading for a recession, and the Fed may have to cut rates moreaggressively.

Lower interest rates benefit gold prices for two main reasons. Firstly, goldis non-yielding, meaning it doesn't pay an income; therefore, demand for goldincreases as interest rates decrease. Put another way, gold prices often risewhen interest rates are lowered, and the opportunity cost of holdingnon-yielding gold falls.

Secondly, the US dollar often declines when the Federal Reserve lowers USinterest rates. Since gold is priced in US dollars, the gold price and the USDprice are inversely correlated. When the USD falls, the price of Gold can rise,and vice versa—a weaker USD can boost the price of Gold.

The market is pricing around 110 basis points of rate cuts throughout therest of the year, with further cuts expected in 2025, which could supporthigher gold prices.

However, should central banks cut rates less than expected, this could limitthe upside in Gold and potentially pull the precious metal lower.

Safe haven demandamid geopolitical uncertainty

Gold is also seen as a safe haven in times of geopolitical and economicuncertainty. Geopolitical uncertainty has also been an important driver of golddemand, helping the price to all-time highs. As a safe-haven asset, gold'sprice often increases during times of elevated geopolitical tensions and policyuncertainty. Gold buying ramped up significantly following the breakup of thewar in Ukraine in 2022 and, more recently, with the start of the Israel—Gazawar.

These geopolitical tensions are not expected to defuse anytime soon.Instead, there are fears that the war in the Middle East could broaden toinclude Iran-backed Hezbollah, which could fuel further safe-havendemand.

Should geopolitical risk ease, Gold prices could slip lower amid safe havenoutflows.

Central bankbuying

Central banks have shown an ongoing commitment to buying and accumulatinggold. While the overall demand for central bank buying has eased as the goldprice has reached record highs, according to the World Gold Council, demandremains buoyant. Evidence of central bank buying can be seen in July as globalcentral banks added 37 tonnes to official reserves, representing a 206%month-on-month increase, the highest monthly total since January.

Central banks are still keen to accumulate gold despite the elevated price,given its role as a store of value and its performance in times of crisis.China has been a key buyer of gold and, according to reports, has around 20% ofits reserves in the precious metal. According to the World Gold Council, thePBoC bought 224.9 tonnes of gold, more than it sold in 2023, equating to around5% of all global gold demand. The buying continued this year as China reducedits US dollar reserves. The actual size of China’s gold holding doesn’t standout compared to other central banks, and the WGC data puts it seventh amongmajor countries, behind Russia and the US, among others. This means that Chinacould continue to build its gold reserves to diversify, which could support thehigher gold price.

Trading Gold withPXBT

There are many ways to benefit from changes in Gold prices, from buyingphysical Gold to trading it through an online brokerage such as PXBT.

PXBT is a regulated Forex and CFD broker that offers a wide range ofCommodities, Currencies, and Indices to trade on the MT5 platform, includingGold. It also offers low fees and ultra-fast execution. PXBT is committed todelivering the latest brokerage infrastructure and deep expertise for tradersacross the globe, with its industry-leading platform providing an intuitiveinterface, charting options, and mobile trading.

Learn more about PXBT

Disclaimer: The information provided herein is for informationalpurposes only and does not constitute personal recommendation or investmentadvice. Past performance is not a reliable indicator of future results. Thefinancial products offered by the Company are complex and come with a high riskof losing money rapidly due to leverage. These products may not be appropriatefor every investor. You should carefully assess whether you understand howthese leveraged products operate and whether you can tolerate the high risk oflosing your money. PXBT Trading Ltd does not serve clients from RestrictedJurisdictions as listed on its website.