Spot bullion climbed as much as 2.2% Friday, exceeding the previous record set last month, as a disappointing reading on the US housing market reinforced expectations of fast and deeper cuts by the Fed. Lower rates generally are positive for gold as it pays no interest.

The precious metal is up more than 20% this year amid mounting optimism on monetary easing and large purchases by central banks. It also has seen increased demand as a haven asset due to rising geopolitical risks, including tensions in the Middle East and Russia’s war with Ukraine.

Bullion began shooting higher earlier in the year — surprising seasoned analysts and veterans as there wasn’t always a clear macro catalyst to justify its price rally. It sustained those gains even as traders dialed back bets on the timing of rate cuts. More recently, gold has ticked higher as US officials widely are expected to start lowering rates soon.

A slew of US data on recent activities has convinced markets the US central bank is on the cusp of lowering borrowing costs from a more than two-decade high, with the metal’s conventional drivers returning to the fore.

There’s debate around how deep the Fed may cut rates given recent economic readings gave conflicting signals on the state of the US economy. 

Gold investors are “typically more prone to think the Fed will be more aggressive on the monetary accommodation front,” said Bart Melek, global head of commodity strategy at TD Securities. Prices could rise further to $2,700 in the coming quarters, as “the macro/monetary and central bank ducks are aligning in a row,” he said.

Investor Positioning

Speculators boosted their net-bullish bets on Comex gold futures to a near four-year high in the week ending Aug. 13, Commodity Futures Trading Commission data show. Meanwhile, gold holdings in exchange-traded funds have risen in recent months following a couple of years of outflows, data compiled by Bloomberg show.

Traders on Friday assessed the latest economic data for clues on the outlook for Fed policy. Figures showed new-home construction in the US fell in July to the lowest level since the aftermath of the pandemic as builders respond to weak demand. 

It “is another indicator that a recession’s on its way,” said Bob Haberkorn, senior market strategist at RJO Futures. The Fed will cut rates “and go further than what was expected before.”

Spot gold gained 2.1% to $2,508.82 an ounce as of 4:06 p.m. in New York. Silver and palladium advanced, while platinum was little-changed.